Tax Type
Individual Income Tax
Partnerships
Description
Nonresident limited partners; Passive rental and royalty income
Topic
Partnerships
Persons Subject to Tax
Taxpayers
Date Issued
03-28-1991
March 28, 1991
Re: Request for Ruling: Individual Income Tax
Dear********************
This will reply to your letter of January 10, 1991, in which you request a ruling on the taxability of certain limited partners, who are nonresidents of Virginia.
FACTS
Certain individuals are limited partners (the "Limited Partners") in a limited partnership (the "Partnership") organized under the laws of a state other than Virginia. The Limited Partners' interests in the Partnership aggregate over 99.9%, and the interest of the general partner, which is a corporation, is less than 1%. At the present time and for most of the period of the Partnership's existence, the general partner has had one part time employee in Virginia. The Partnership receives Virginia source mineral royalties and rentals under net leases with unrelated parties. None of the Limited Partners presently resides in Virginia. one partner resides in the United Kingdom.
You wish to know whether the Department of Taxation considers nonresident general and limited partners receiving passive rental and royalty income as being subject to Virginia tax.
RULING
The department has previously set forth its policy regarding the taxation of nonresidents, who are partners in a partnership receiving income from Virginia sources. (See P.D. 88-232 (7/29/88)). By virtue of the fact that the Partnership has Virginia source income, as defined under Va. Code §58.1-302, the nonresident partners have Virginia source income.
Based upon the facts presented, the Limited Partners in this case are subject to Virginia income tax and income tax return filing requirements, as nonresidents, for all years that the Partnership has Virginia source income. If the partners come forward and pay tax for all years that the Partnership had Virginia source income, the department may consider an offer in compromise under Va. Code §58.1-105 to waive late penalties. In addition to the income tax filing requirements, the Partnership may also be subject to the Nonresident Real Property owner Registration requirements of Va. Code §§ 58.1-316 - 58.1-317.
I hope the foregoing information has answered your questions. However, please contact the department if you need additional information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner