Tax Type
Corporation Income Tax
Description
Sales factor, sold its assets, some real estate to employees in a leveraged buyout
Topic
Allocation and Apportionment
Date Issued
11-30-1988
November 30, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-416 Sales Factor, Sales in Commonwealth
Dear******************
This is in response to a conference held on October 24, 1988, in which you asked us to reconsider the portion of our ruling letter dated June 20, 1988, P.D. No. 88-140 (copy enclosed) which relates to the inclusion of real estate proceeds in the sales factor.
Facts
The taxpayer sold its assets, some of which was real estate located in Virginia, to employees in a leveraged buyout. Because all of the parties involved in the transaction were thoroughly familiar with the assets, you state that no one visited the Virginia site in connection with the negotiation of the sale and that all activities were conducted at the corporate headquarters or other locations outside of Virginia. Therefore, you contend that the gross proceeds from the sale attributable to the real estate located in Virginia should not be included in the numerator of the sales factor.
Determination
As set out in the enclosed letter, resolution of this issue turns on the interpretation of VR 630-3-416 which provides:
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- The income producing activity is deemed performed at the situs of real and tangible personal property or the place at which or from which such activities are performed by employees of the taxpayer.
- The income producing activity is deemed performed at the situs of real and tangible personal property or the place at which or from which such activities are performed by employees of the taxpayer.
-
- in the case of gross receipts from the sale of real estate, the real estate is located in Virginia, or
in the case of gross receipts from the sale of intangible property or services, the activities which generated the gross receipts are performed by employees who are located in Virginia when performing the activities.
- in the case of gross receipts from the sale of real estate, the real estate is located in Virginia, or
Accordingly, the assessment, as adjusted by the June 20, 1988, letter, is correct.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner