Sec. 19-8.1. Allocation of entire net income for a short period

Tax Law, §§ 1453(k) and 1454

(a) A taxpayer which is entitled to allocate entire net income within and without New York State for only part of a taxable year allocates its entire net income for only that part of the taxable year during which it is entitled to allocate. (See section 19-2.1 of this Part - General rules for allocation of entire net income.) A taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes computes its prorated entire net income pursuant to section 18-2.8 of this Title and computes its entire net income allocation percentage only for that part of the taxable year during which it is entitled to allocate.

(b)

(1) The entire net income allocation percentage is applied to entire net income which has been prorated for the period for which the taxpayer is entitled to allocate. In the case of a taxpayer subject to tax for a period less than its taxable period for Federal income tax purposes, the entire net income allocation percentage is applied to entire net income which:

(i) has been prorated, pursuant to section 18-2.8 of this Title, for the period during which the taxpayer is subject to tax; and

(ii) has been prorated for the period during which the taxpayer is entitled to allocate.

(2) Entire net income (or prorated entire net income) is prorated for the period the taxpayer is entitled to allocate, and is computed as follows:

(i) divide entire net income (or prorated entire net income) by the number of calendar months or major parts thereof covered by the taxpayer's New York State return; and

(ii) multiply the amount determined in paragraph (1) of this subdivision by the number of calendar months or major parts thereof for which the taxpayer is entitled to allocate.

(3) After entire net income (or prorated entire net income) has been prorated for the period for which the taxpayer is entitled to allocate, the remaining portion of entire net income (or prorated entire net income) will be allocated at either 100 percent or zero percent depending on whether the taxpayer's business was conducted solely within or solely without New York State.

(c) If, in the opinion of the Tax Commission, the method described in this section for prorating entire net income (or prorated entire net income) for the period during which the taxpayer is entitled to allocate does not properly reflect the taxpayer's entire net income (or prorated entire net income) for the period during which it is entitled to allocate and for the remaining period, the Tax Commission may determine entire net income solely on the basis of the entire net income properly recorded on the taxpayer's books and records during such periods.

(d) The short period entire net income allocation percentage is determined in the same manner as the entire net income allocation percentage described in section 19-2.2 of this Part, except that:

(1) the payroll factor is computed only for the period for which the taxpayer is entitled to allocate;

(2) the receipts factor is computed only for the period for which the taxpayer is entitled to allocate; and

(3) the deposits factor is computed only for the period for which the taxpayer is entitled to allocate.

A taxpayer must submit complete details with its return showing how it computed each factor of the short period entire net income allocation percentage.

(e) The following are examples illustrating the computation of the entire net income allocation percentage for a short period and the application of this percentage to entire net income:

Example 1:

A taxpayer which was subject to tax for all of 1985 reports on a calendar-year basis and had entire net income of $72,000 for such taxable year 1985. On June 13, 1985 the taxpayer began doing business both within and without New York State, which entitled it to allocate for the period June 13, 1985 through December 31, 1985 (seven months), the taxpayer had the following:

	New York State	Total
Payroll	$ 60,800*	$ 80,000
Receipts	777,600	960,000
Deposits	1,080,000	1,350,000

*

80% of the New York State amount.

The taxpayer's short period entire net income allocation percentage is computed as follows:

Payroll factor [($60,800 / $80,000) × 100]	76%
Receipts factor [($777,600 / $960,000) × 100]	81%
Deposits factor [($1,080,000 / $1,350,000) × 100]	80%
Receipts factor [($777,600 / $960,000) × 100]	81%
Deposits factor [($1,060,000 / $1,350,000) × 100]	80%
Total	398%

The short period entire net income allocation percentage is 79.6% (398% ÷ 5).

The taxpayer's entire net income allocated to New York State is $63,432, computed as follows:

$72,000 / 12 (months) = $6,000
$6,000 × 7 (months) = $42,000
$42,000 × 79.6% = $33,432
$72,000 − $42,000 = $30,000
Entire net income allocated at 100%	$30,000
Entire net income allocated at 79.6%	33,432
Total allocated entire net income	$63,432

Example 2:

A banking corporation incorporated outside the United States has been doing business in the State of California since 1979. It began doing business and became subject to tax in New York State on April 2, 1985. The taxpayer reports on a calendar-year basis and had entire net income of $60,000 for the 12-month calendar year 1985. For the short taxable period April 2, 1985 through December 31, 1985 (nine months), the taxpayer had the following:

	New York State	Total
Payroll	$ 70,000*	$ 100,000
Receipts	560,000	800,000
Deposits	672,000	1,120,000

*

80% of the New York State amount.

The taxpayer's short period entire net income allocation percentage is computed as follows:

Payroll factor [($70,000 / $100,000) × 100]	70%
Receipts factor [($560,000 / $800,000) × 100]	70%
Deposits factor [($672,000 / $1,120,000) × 100]	60%
Receipts factor [($560,000 / $800,000) × 100]	70%
Deposits factor [($672,000 / $1,120,000) × 100]	60%
Total	330%

The short period entire net income allocation percentage is 66% (330% ÷ 5).

The taxpayer's prorated entire net income computed pursuant to section 18-2.8 of this Title is $45,000, computed as follows:

$60,000 / 12 (months) = $5,000 $5,000 × 9 (months) = $45,000

Such prorated entire net income allocated to New York State is $29,700 ($45,000 × 66%).

Notation

*

80% of the New York State amount.