Tax Type
Corporation Income Tax
Description
Dividends; Allocation and apportionment
Topic
Allocation and Apportionment
Date Issued
02-27-1987
February 27, 1987
Re: §58.1-1821 Application; Corporation Income Tax
§58-151.037 Allocation and Apportionment of Income
Dear ************************
This is in response to your letter of October 20, 1986, resubmitting a protective claim for refund for tax years 1978, 1979 and 1980. The protective claim was filed within three years of an audit assessment for the years in question. In view of the issues involved we are deciding this case on the merits in the manner provided for applications under §58.1-1821.
In the return for 1980 a dividend from a wholly owned subsidiary was shown on form 1120, Schedule C, Line 10 "other dividends" for reasons related to its federal tax computer program. The dividends should have been shown on Line 9 "Qualified affiliate group 100% deductible." The misplacement made no difference to federal tax liability because a consolidated federal return was filed in which the dividends were eliminated.
The dividends in question clearly qualify for the Virginia subtraction for dividends received from 50% owned subsidiaries as well as for the federal dividend deduction under I.R.C. § 243(a)(3). Accordingly the dividends may be removed from the income allocated to Virginia.
The interest income allocated to Virginia should be reduced by expenses related to production of the income. You have submitted a compilation of expenses related to the production of the allocable interest income which you claim is a "conservative estimate." The expenses are relatively high as a percentage of income. Upon further investigation you have submitted additional information on the nature of the expenses and we are now satisfied that the expenses claimed are related to the production of the allocable interest income. Accordingly the interest income allocated to Virginia will be reduced by the expenses related to its production.
You will shortly receive a check for the tax plus accrued interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner