Even though New York amended its combination statute for years beginning in 2007, we are just now beginning to see litigation related to those amendments. At the end of June 2013, an administrative law judge in New York’s Division of Tax Appeals issued the first determination analyzing the new law. The analysis in Matter of Knowledge Learning Corporation was notably quite restrictive, resulting in a taxpayer loss.
A New York administrative law judge recently held in Matter of C.V. Starr & Co., Inc. that income received by a taxpayer from its ownership of common stock was investment income. In so holding, the ALJ addressed an important issue for many New York taxpayers and concluded that a taxpayer’s motive or intent for acquiring and holding stock and the manner in which the taxpayer used that stock are irrelevant to the determination of whether that stock qualifies as investment capital for corporate income tax purposes.
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