Tax Type
Individual Income Tax
Partnerships
Description
Nonresident partnerships and S corporations
Topic
Allocation and Apportionment
Taxable Income
Date Issued
07-30-1990
July 30, 1990
Re: §58.1-1821 Application: Individual Income Tax
Dear ****
This will reply to your letter dated April 10, 1990 in which you seek correction of income tax assessments for your client, **************(the "Taxpayer") for the taxable years 1985 1987.
FACTS
The taxpayer, an Illinois resident, earned wages as a professional athlete for the years under examination. Part of these wages were allocated to Virginia, upon audit by the Department of Taxation, based upon the number of days worked in Virginia in proportion to the total days worked. The wages are deemed to be Virginia source income.
The taxpayer filed Virginia Forms 763 for the above years; however, in filing the original returns, he did not apportion any of his income to Virginia sources. Nonetheless, the taxpayer agrees in part with the allocation method used by the department. The taxpayer requests herein that the assessment be adjusted to reflect an allocation of income or loss from the partnerships and S corporations in which the taxpayer has invested his Virginia source wages.
DETERMINATION
Va. Code §58.1-325 provides:
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- The Virginia taxable income of a nonresident individual ... shall be an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources. (Emphasis added.)
Va. Code §58.1-302 in turn limits the term "income ... and deductions from Virginia sources to the items of income gain, loss and deductions attributable to the ownership of property or the conduct of business in Virginia. Va. Reg. 630-2-325 interprets both statutes, providing that nonresidents must compute the tax based on
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- ... [income. gain, losses and deductions] attributable to property within Virginia, or to the conduct of a trade. business, occupation or profession within Virginia. ... [including] salary, tips or wages earned in Virginia, gain on the sale of property located in Virginia, income or loss from a partnership, estate, trust, or S corporation doing business in Virginia, and income from intangible personal property employed by an individual in a business, trade, profession, or occupation carried on in Virginia.
- ... [income. gain, losses and deductions] attributable to property within Virginia, or to the conduct of a trade. business, occupation or profession within Virginia. ... [including] salary, tips or wages earned in Virginia, gain on the sale of property located in Virginia, income or loss from a partnership, estate, trust, or S corporation doing business in Virginia, and income from intangible personal property employed by an individual in a business, trade, profession, or occupation carried on in Virginia.
Furthermore, it is my understanding that Illinois allows a credit against its income tax for income tax paid to another taxing jurisdiction when the same income is "double taxed" by both jurisdictions.
Based on the foregoing, the original assessments must be upheld unless the taxpayer can demonstrate that his partnership and S corporation losses are attributable to businesses actually carried on in Virginia. As no information has been presented to this effect, the balance of the assessment is now due and payable in full.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner