Tax Type
Intangible Personal Property Tax
Description
Capital not otherwise taxed
Topic
Taxable Transactions
Date Issued
09-26-1984
September 26, 1984
Re: §58-1118 Application
Capital Not Otherwise Taxed
For the Years 1981, 1982 & 1983
Dear ****
This letter is written in reference to the §58-1118 application on ***** captioned above.
In your protest you state that if the Department of Taxation does not agree with your position on the contested issues you would like to have a conference. The Department needs additional information on three protested issues before a determination may be made. The Department will review your additional information and notify you if a conference is necessary.
First, you take exception with the Department's adjustment which included goodwill in taxable capital. You contend that the Internal Revenue does not recognize goodwill as a deductible expense and you question why Virginia should include this item in taxable capital. You also state that goodwill is a balancing figure and that the amount used for Federal income tax purposes was substantially less than the amount included in taxable capital per audit.
Please forward supplemental information which analyzes the goodwill account for the capital tax years 1981 and 1982. In your analysis please include information which explains the circumstances surrounding the entry of goodwill on the books, the differences in trial balance amounts and amounts you noted were used for income tax purposes, and what transaction caused the $**** difference in the goodwill account between the capital years 1981 and 1982.
Next, you protest the adjustment which includes the asset, "drawings" in taxable capital. Please supply supplemental information which describes the account and sets forth the reasons for your position.
The last issue we need additional information on is the costs in excess of billings. The Department eliminated $**** from the series of accounts used in computing the taxable asset. The amount eliminated represented real estate and the remainder represented costs in excess of billings. Please supply additional information which clarifies your position and if the amount considered taxable was work done on houses being built on Taxpayer's real estate or on someone else's real estate.
We appreciate your cooperation and consideration in this matter and look forward to receiving the additional information as requested.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner