Sec. 5-8.4. Adjustment on disposition of stock, partnership interest or other ownership interest from qualified investments

Tax Law, § 210(20)(c)

(a) Where stock, partnership interest or other ownership interest arising from a qualified investment, as described in section 5-8.2(a)(1) and (3) of this Subpart, is disposed of, the amount of such credit must be reflected in the cost of such stock, partnership interest or other ownership interest. Therefore, the amount of the economic development zone capital tax credit attributable to such stock, partnership interest or other ownership interest must be included in the taxpayer's entire net income in the year of disposition.

(b) Where a portion of the stock, partnership interest or other ownership interest arising from a qualified investment, used in determining the amount of the economic development zone capital tax credit is disposed of, only that portion of such credit attributable to the stock, partnership interest or other ownership interest, disposed of is required to be included in entire net income in the year of disposition.

Example:

Taxpayer A, a calendar year taxpayer, purchased 100 shares of stock from the OZ Corporation, an economic development zone capital corporation, for $20 a share on June 1, 1995. Taxpayer A claimed an economic development zone capital tax credit of $500. On September 3, 1996 such taxpayer sold 20 shares of the OZ Corporation stock. Therefore, when computing entire net income in 1996, Taxpayer A is required to include $100 in entire net income which is the portion of the economic development zone capital tax credit claimed in 1995 applicable to the 20 shares of OZ Corporation stock sold, determined as follows:

Original consideration paid for OZ Corporation stock (100 shares × $20)	=	$2000
Economic development zone capital tax credit claimed in 1995	=	$ 500
Credit per share
($20/$2000 × $500)	=	$5
Amount required to be included in entire net income in 1996 (20 shares × $5.00 per share)	=	$ 100