Tax Type
Corporation Income Tax
Description
S Corporations
Topic
Collection of Tax
Date Issued
03-22-1996
March 22, 1996
Re: § 58.1-1821 Application; Corporate income taxes
Dear*****************
This will reply to your letter of July 19, 1994, in which you contest the assessment of additional corporate income taxes to********* (the "Taxpayer") for the taxable years ended December 31, 1990 and 1991.
The Taxpayer was audited, and an adjustment was made to consolidate the income of a 100% owned subsidiary ("Company S") with that of the Taxpayer. Company S's only income was from dividends and interest earned on loans made to affiliates. You contest the assessments, and request they be reversed.
Company S was created to hold the stock of certain foreign subsidiaries. As a holding company, S would receive the foreign source dividends, thereby separating foreign source income from the Taxpayer's expenses. This allowed the Taxpayer to maximize the amount of federal foreign tax credit available. S also became the owner of certain domestic subsidiaries in order to satisfy certain federal requirements. S made loans from the dividend income it received to the Taxpayer and affiliates. It is the interest from these intercompany loans which has been consolidated with the Taxpayer. (All of the dividend income qualifies for a subtraction and thus is not taxed by Virginia.)
The facts in this case closely resemble those as cited in Public Document (P.D.) 95-229, copy attached. The department has written to you twice requesting additional information, but none has been provided. Because we have no basis upon which to distinguish your facts from those described in P.D. 95-229, we have no alternative but to uphold the assessment based upon the law and analysis described therein.
The assessment has been updated for interest as reflected on the attached schedules. The balance due, ***should be paid within 30 days to prevent the accrual of additional interest. Your payment may be sent to ***** c/o Office of Tax Policy, Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282-1880.
If you have any additional questions, please call***** at ******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8287M
Re: § 58.1-1821 Application; Corporate income taxes
Dear*****************
This will reply to your letter of July 19, 1994, in which you contest the assessment of additional corporate income taxes to********* (the "Taxpayer") for the taxable years ended December 31, 1990 and 1991.
FACTS
The Taxpayer was audited, and an adjustment was made to consolidate the income of a 100% owned subsidiary ("Company S") with that of the Taxpayer. Company S's only income was from dividends and interest earned on loans made to affiliates. You contest the assessments, and request they be reversed.
DETERMINATION
Company S was created to hold the stock of certain foreign subsidiaries. As a holding company, S would receive the foreign source dividends, thereby separating foreign source income from the Taxpayer's expenses. This allowed the Taxpayer to maximize the amount of federal foreign tax credit available. S also became the owner of certain domestic subsidiaries in order to satisfy certain federal requirements. S made loans from the dividend income it received to the Taxpayer and affiliates. It is the interest from these intercompany loans which has been consolidated with the Taxpayer. (All of the dividend income qualifies for a subtraction and thus is not taxed by Virginia.)
The facts in this case closely resemble those as cited in Public Document (P.D.) 95-229, copy attached. The department has written to you twice requesting additional information, but none has been provided. Because we have no basis upon which to distinguish your facts from those described in P.D. 95-229, we have no alternative but to uphold the assessment based upon the law and analysis described therein.
The assessment has been updated for interest as reflected on the attached schedules. The balance due, ***should be paid within 30 days to prevent the accrual of additional interest. Your payment may be sent to ***** c/o Office of Tax Policy, Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282-1880.
If you have any additional questions, please call***** at ******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8287M
Rulings of the Tax Commissioner