Tax Type
Corporation Income Tax
Description
Apportionment of income; Proceeds from deferred like-kind exchange
Topic
Allocation and Apportionment
Date Issued
11-18-1994
November 18, 1994
Re: §58.1-1821 Application: Corporate income taxes
Dear*************
This will reply to your letter of March 8, 1994, in which you have applied for correction of an assessment of additional corporate income taxes to***************(the "Taxpayer") for the taxable year ended September 30, 1991.
FACTS
The Taxpayer was audited, and an adjustment was made to include the proceeds from a deferred like-kind exchange in the sales factor. You contest this adjustment, and believe that the proceeds are not properly includable in either the numerator or denominator of the sales factor.
DETERMINATION
VR 630-3-408 provides, in pertinent part:
-
- ...In order to be included in the numerator and denominator of each factor in the three-factor formula, property, payroll, and sales must meet two requirements .
1. The property, payroll, and sales must be used to produce Virginia taxable income. Income or gain produced by the property. payroll, and sales must be included in federal taxable income and not subtracted in computing Virginia taxable income... (Emphasis added)
- ...In order to be included in the numerator and denominator of each factor in the three-factor formula, property, payroll, and sales must meet two requirements .
To the extent that gain from such a transaction is partly included in federal taxable income, such as when taxable boot is received, it shall be included in the Virginia sales factor in the same year that it is included in federal taxable income.
Accordingly, the adjustment shall be reversed, and the assessment shall be abated.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7753M
Rulings of the Tax Commissioner