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Capital Gain - could it be passive ? IS it NY Sourced

  • 1.  Capital Gain - could it be passive ? IS it NY Sourced

    Platinum Most Valuable Member
    Posted 09-25-2019 18:18
    If an NYS "S" corp has a brokerage account and realizes a LTCG from a stock trade and passes it through to the shareholders. How should i handle it ?
    the shareholder is not active in the business , nor are they a NYS resident.

    Would that capital gain be NYS sourced income to the shareholder ?
    could that be considered passive income to the shareholder?

    so the question is does the gain change its character and source of income because it passes to the shareholder through a passive investment

    Its an important distinction, and we all have the situation.

    I believe it is not NYS sourced income taxable to a non-resident shareholder,
    and i think it is NOT passive income,  but i would like to reach out to all and discuss here please.


    any thoughts appreciated.


    Abby

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    Abby Alhante
    KURCIAS & ALHANTE, CPAs LLC
    Melville NY
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  • 2.  RE: Capital Gain - could it be passive ? IS it NY Sourced

    Bronze Most Valuable Member
    Posted 09-26-2019 12:04
    I agree
    For a non-NYS shareholder - the only income would be the Ordinary Income - or Real Estate Income
    any "investment" income - like LTCG - or Interest income or Dividend income WOULD NOT be sourced to NYS for this non-resident shareholder

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    Ira Kriegsman
    IRA D KRIEGSMAN CPA PC
    Woodbury NY
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  • 3.  RE: Capital Gain - could it be passive ? IS it NY Sourced

    Platinum Most Valuable Member
    Posted 09-26-2019 12:14

    I think you are right.....

    Lets see if anyone else disagrees, and also chimes in...

     

     

    IRS   would you feel the same is true for a partnership rather than an "S" corp.

     

    Abby

     

     

     

     

    Abby Alhante,  CPA

     

    Kurcias  & Alhante, LLC  CPAs

    525 Broadhollow Road   Suite 104

    Melville NY  11747

    516.829-5890  Ext  2   Fax 516-829-3976

    Mobile 516-381-9301

    AbbyA@KurciasAlhanteCPAs.com

    ( E mail response preferred )

     






  • 4.  RE: Capital Gain - could it be passive ? IS it NY Sourced

    Bronze Most Valuable Member
    Posted 09-26-2019 12:22
    YES - it would make no difference as to the entity type
    IMO

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    Ira Kriegsman
    IRA D KRIEGSMAN CPA PC
    Woodbury NY
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  • 5.  RE: Capital Gain - could it be passive ? IS it NY Sourced

    Platinum Most Valuable Member
    Posted 09-26-2019 14:34

    Btw

     

    I  respect your opinion

     

     

     

    Abby Alhante,  CPA

     

    Kurcias  & Alhante, LLC  CPAs

    525 Broadhollow Road   Suite 104

    Melville NY  11747

    516.829-5890  Ext  2   Fax 516-829-3976

    Mobile 516-381-9301

    AbbyA@KurciasAlhanteCPAs.com

    ( E mail response preferred )

     






  • 6.  RE: Capital Gain - could it be passive ? IS it NY Sourced

    Platinum Most Valuable Member
    Posted 10-01-2019 17:35
    I asked NYS on the issue of " will a non-resident " shareholder be taxed on the portfolio income of the NYS "S" corp.
    their answer surprised me , which is why i am posting it here.

    NYS said  YES. a non-resident shareholder of a NY "S" corp  will be taxed on interest and other investment income of the "S" corp. They then went on to say that it must be allocated by the BUSINESS APPORTIONMENT FACTOR.

    This makes no sense to me, but it is law.  referencing     https://www.tax.ny.gov/pdf/memos/multitax/m15_7c_6i.pdf


    take note of their response .


    Abby

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    Abby Alhante
    KURCIAS & ALHANTE, CPAs LLC
    Melville NY
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  • 7.  RE: Capital Gain - could it be passive ? IS it NY Sourced

    Silver Most Valuable Member
    Posted 09-28-2019 16:54
    ​This gain is not passive income  but be careful- gain can be passive when it arises out of the trade or business assets.  The regulations provide specific rules that make wonderful fireside reading this fall.

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    Robert Barnett
    CPA, ESQ.
    Capell Barnett Matalon & Schoenfeld LLP
    JERICHO NY
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