96-151
Response
November 6, 1996
Request
October
2, 1996
XXXXX
Utah
State Tax Commission
Fax
XXXXX
Dear
XXXXX
RE:
Utah Law on Investment Partnerships
We
have an investment partnership who invests in other investment partnerships
that have no Utah source income for 1995 as all the partnerships invested in
are outside the state. However, for
1996, we do have one investment in a Utah investment partnership located in
Utah and producing Utah source income.
We would like to get some written documentation from you or the Utah Tax
Code regarding treatment of Utah source income for non-resident partners. Based on the instructions for the TC-65,
non-residents are to file in Utah and be taxed on the Utah source income. In other states that we file in due to
source income from them, there are no exclusions in their tax code for non-residents who have no other source
income from their state and the source income being passed through to them is
from an investment partnership training on their behalf, and the income
consists solely of capital gains, interests and dividends. We would like to determine before our 1996
filing, if something of this nature exists under the Utah Tax Code. Some examples from other states are as
follows:
New
York State
As
all of the partnership's items of income, gain, loss and deductions are
attributable to the trading of intangible property for its own account, they
are not considered as derived from, or connected with, New York State
sources (NYS tax law section
631(D)). Accordingly, non- resident
limited partners are not required to file New York non-resident returns with
respect to their interest in Example, L.P.
New
York City
Example,
L.P. is not subject to the New York City unincorporated business tax under
section 11- 502 (C) of the New York City tax code which exempts an
unincorporated entity that trades for its own account as does Example, L.P.
North
Carolina
If
a partnerships only activities within North Carolina are in the nature of an
investment account in which the securities are held for capital appreciation
and income, the receipt of dividends and interest and the occasional sales of
stocks and bonds does not constitute carrying on a trade or business in this
State. A non-resident partner does not
include his distributive share of the partnership income in the numerator of
the fraction in determining North Carolina taxable income.
California
Example,
L.P. is a limited partner in several California based limited partnerships, all
of which are investment partnerships which trade in qualified investment
securities for the purpose of California Revenue and the Tax Code Section
17955. Accordingly, California non-resident
partners are not required to file California non-resident income tax returns
with respect to their interest in Example, L.P.
Please
fax or mail us any written/verbal information you may have discussing the issue
as it pertains to the state of Utah.
Thank
you for your help.
Sincerely,
XXXXX
XXXXX
Advisory
Opinion - Taxation of Investment Partnership Income from Utah Sources
Dear
XXXXX
We have received your request for tax
guidance for non-resident investors who receive income from an investment
partnership which earns income from Utah sources. We offer the following guidance:
Under section 59-10-303 of the Utah
Code, a non-resident partner is subject to Utah income tax on his distributive
share of partnership income, gains, and losses derived from Utah sources. (See Utah Administrative Rule R865-9I-21,
enclosed). If the partners have interest
or capital gains arising from investments in real or tangible personal property
located in Utah, the interest or
capital gains is taxable in Utah. If
the interest or capital gains is earned from investments in intangibles (such
as stock), or from investments in real or tangible personal property outside
Utah, the income is taxable in the partner’s state of domicile.
For non-resident partners, the
partnership may file a composite return for those partner who have no other
income from Utah sources. See Utah Administrative
Rule R865-9I-13 (enclosed) for more information about the composite return.
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner