Tax Type
Corporation Income Tax
Description
ACRS modifications
Topic
ACRS Modifications
Date Issued
05-12-1988
May 12, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-323 ACRS Modifications
Dear****************
This is in response to your letter of June 8, 1987, in which you applied for correction of an assessment of corporation income tax. I apologize for the delay in responding.
Facts
The taxpayer has qualified as a Real Estate Investment Trust under federal law. In 1984 the taxpayer had a significant balance of excess distributions which were not deducted on the federal return because the federal taxable income was zero. In an office audit the department required an addition for 30% of the ACRS deduction and assessed additional tax. You protest the addition on the grounds that the taxpayer received no benefit from the ACRS deduction due to the excess distributions.
Discussion
Virginia law requires all taxpayers to make additions and subtractions with regard to ACRS deductions reported on their federal returns. We have recently ruled that these modifications must be made by Real Estate Investment Trusts. See ruling letter dated March 30, 1987, P.D. No. 87-89 (copy enclosed).
If the ACRS modifications are not reported by the taxpayer, they will not be made by anyone. In response to your claim that the taxpayer claims it did not receive a benefit from federal ACRS deductions, it should be noted that:
- Virginia law regarding ACRS modifications does not depend on the taxpayer receiving a benefit from ACRS deductions.
- The shareholders received a benefit attributable to ACRS deductions because the ACRS deductions made it possible for the taxpayer to distribute cash in excess of its taxable income.
Determination
Accordingly, the assessment is correct as made. The full amount of the tax and interest assessed has been paid. However, between the date of assessment and the date of payment additional interest accrued. You will shortly receive a bill for the additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner