Tax Type
Corporation Income Tax
Description
Foreign source income
Topic
Subtractions and Exclusions
Date Issued
09-08-1986
September 8, 1986
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-302 Foreign Source Income
Dear *********************
This is in response to your letter of November 27, 1984, applying for correction of an assessment of Corporation Income Tax. The assessment was the result of a field audit in which a number of adjustments were made. The only adjustment disputed in this application relates to subtractions for "foreign source income" claimed under Va. Code Ann. §58-151.013(c)(9) (1984 Supp.) which has recently been recodified as §§58.1-302 and 58.1-402.C.8. (1984 Repl. Vol.). The auditor reduced the subtractions by the expenses related to the foreign source income as shown on I.R.S. form 1118.
All Virginia subtractions are allowed only to the extent included in federal taxable income. See §58.1-402.C. Since only net income is included in federal taxable income, only net income may be subtracted. §58.1-302 provides that the provisions of I.R.C. §§861-863 shall be applied in determining the source of n foreign source income." Therefore the I.R.C. provisions are applied to determine the source of both the gross income and the related expenses. Enclosed is a ruling letter dated August 14, 1986, Public Document No. 86-154, in which this issue is more fully discussed.
Accordingly the auditor properly applied the I.R.C. provisions to determine the source of the gross income and expenses in computing the amount of "foreign source income." You will shortly receive an updated bill for the assessment with interest accrued to date. In order to prevent the accrual of additional interest you should pay the amount billed within thirty days.
Sincerely,
W. H. Forst
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner