Tax Type
Corporation Income Tax
Description
Allocation of capital gain income
Topic
Allocation and Apportionment
Date Issued
01-03-1986
January 3, 1986
Re: §58.1-1821 Application; Corporation Income Tax
Allocation of capital gain income for FYE 3/81
Dear *****************
This is in response to your application protesting an assessment of additional tax and amended federal returns submitted on September 30, 1985.
FACTS
For the taxable year ended March, 1981, virtually all of the taxpayer's income consisted of allocable capital gain and rental income. The taxpayer contends that some of its expenses should offset the capital gain income. The auditor applied all expenses to the rental income and apportionable income.
At a conference, the taxpayer indicated that the capital gain resulted from sales of real estate held in the ordinary course of business and thus did not qualify as capital gain under federal law. on advice of the taxpayer's accountants an amended federal return would be filed revising the treatment of the sales involved.
The amended federal and Virginia returns have been filed which show the gains to be ordinary income for federal purposes and apportionable income for Virginia purposes. The amended return shows that no additional Virginia tax is due.
DETERMINATION
Based on a review of the amended return, it appears that the income in question is now properly treated as apportionable income and that the expenses may be properly applied to it. Since the amended return incorporates other adjustments made by the auditor i find that the assessment of additional tax should be abated due to the facts shown in the amended federal and Virginia returns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner