Tax Type
Corporation Income Tax
Description
Amortization of customer list; Adjustments by I.R.S.
Topic
Taxable Income
Date Issued
10-07-1992
October 7, 1992
Re: §58.1-1821 Application; Corporation Income Tax
Dear***************
This will reply to your letter of May 30, 1992, in which you seek correction of corporation income tax assessments on behalf of ***************(the Taxpayer").
FACTS
The Taxpayer's federal corporation income tax returns were audited by the Internal Revenue Service (IRS), resulting in an increase in federal taxable income. The increase in federal taxable income was due to the disallowance of amortization allocated to a customer list. Additional taxes and interest were assessed by both the IRS and the department pursuant to the IRS audit. The Taxpayer paid the additional federal tax.
You believe that the position taken by the Taxpayer on the return as filed was correct in claiming the deduction for amortization and point out that the U.S. Supreme Court has granted certiorari in a case, Newark Morning Ledger Co. v. The United States of America, where the allowance of amortization of a customer list is at issue. You request that the department abate its assessment, based on what you perceive as the probable outcome of the case, favoring the Taxpayer's position.
DETERMINATION
Virginia taxable income is based on federal taxable income. The disallowance of the amortization deduction increased federal taxable income for both federal and Virginia tax purposes. Currently, there is nothing to indicate that the increase in federal taxable income or the assessments resulting from that increase were erroneous. Therefore, the assessments of additional Virginia corporation income tax were properly made and are now due and payable.
If the IRS changes the Taxpayer's federal tax liability and issues a refund, the Taxpayer will have 90 days from the date of the final determination of federal tax liability to file an amended return claiming a refund, pursuant to Va. Code §58.1-1823.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6325F
Rulings of the Tax Commissioner