Tax Type
Corporation Income Tax
Description
Income from terminated pension plan
Topic
Allocation and Apportionment
Date Issued
01-04-1988
January 4, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-408 Apportionment of Income
Dear**********
This is in response to your letter of September 14, 1987 in which you applied for correction of an assessment of corporation income tax.
Facts
During the 1985 tax year the taxpayer recognized a significant amount of income due to the termination of a pension plan. on the return the taxpayer treated the income as allocable income. In an office audit the income was removed from allocable income and included in apportionable income.
Discussion
In your application you state that the income from the termination of a pension plan should not be included in apportionable income because the termination was not a transaction or activity in the regular course of the taxpayer's trade or business, and because the pension plan was not an asset that constituted an integral part of the taxpayer's regular trade or business operations.
Under §58.1-408 of the Code of Virginia, all income other than dividends is included in apportionable income. There is no provision in Virginia law allowing a subtraction or permitting allocation of the type of income involved in this application.
The employees covered by the pension plan are an integral part of the taxpayer's trade or business and the contributions to the pension plan have been deductible in computing federal and Virginia taxable income. In analyzing the activity associated with the pension plan we conclude that there is sufficient relationship to the taxpayer's activities in Virginia to support including the income in apportionable income.
Determination
Accordingly, the assessment is correct as made and is now due and payable. You will shortly receive an updated bill with interest accrued to date. The bill should be paid within thirty days to avoid the accrual of additional interest. Although you requested a hearing, this letter has been issued without one. If you still desire a conference you should request one within thirty days from the date of this letter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner