Sec. 3-13.4. Computation of tax under the entity method

(a) Under the entity method, for purposes of determining the taxes measured by the entire net income base, capital base, minimum taxable income base, and the fixed dollar minimum, a corporate partner is treated as owning an interest in the partnership entity. The partner's interest is an intangible asset which is business capital.

(b) Entire net income and minimum taxable income bases.

(1) To the extent a taxpayer's entire net income includes its distributive share of partnership items of income, gain, loss and deduction, such items shall be treated as business income. The taxpayer's distributive share of such partnership items shall be allocated as provided in section 4-6.5(b) of this Title and included in the taxpayer's allocated business income and allocated alternative business income.

(2) While a taxpayer may have the information concerning one or more of the modifications set forth in sections 3-2.3 and 3-2.4 of this Part, such as state bond interest, a taxpayer using the entity method does not have all the information necessary to properly compute its article 9-A tax using the aggregate method. Therefore, no modifications should be made with respect to any partnership items.

(c) Capital base.

The taxpayer's interest in a partnership is business capital and is allocated as provided in section 4-6.5(b) of this Title. The taxpayer's interest in the partnership is the value shown on its books and records kept in accordance with generally accepted accounting principles. If the interest is a marketable security, it is valued at fair market value. The capital base does not include any other amounts which the taxpayer may have included on its balance sheet with respect to its interest in the partnership.

(d) Fixed dollar minimum.

The taxpayer does not take into account any partnership items in determining its fixed dollar minimum.

(e) Subsidiary capital.

Since the taxpayer's interest in a partnership is treated as business capital under the entity method, it can not have subsidiary capital derived from its interest in the partnership.