Mofo New York Tax Insights -- Volume 2, Issue 11

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In This Newsletter:

Combination of Factoring Subsidiary Upheld by Tribunal; City Tribunal Holds Lease Payments Made After WTC Destruction Were Not Subject to Commercial Rent Tax; ALJ Finds Restaurant’s Records Unreliable, but Limits Assessment; Comity is Not a Joking Matter for Taxpayers Seeking Review of City Tax Exemption in Federal Court; “Next” Means “Next” in Nassau County; Guidance Offered on Discounted Purchases Made With Customer Loyalty Cards; and Insights In Brief

Combination of Factoring Subsidiary Upheld by Tribunal

In its first decision involving combination under Article 9-A in more than three years, the New York State Tax Appeals Tribunal has upheld the forced combination of an out-of-state factoring subsidiary with its parent apparel manufacturer. Based on a “sham transaction” analysis, the Tribunal held that the transactions under which the factoring subsidiary was formed and operated “do not merit tax respect,” and therefore the taxpayer failed to rebut the presumption of distortion resulting from substantial intercorporate transactions under the pre-2007 law. Matter of Kellwood Company, DTA No. 820915 (N.Y.S. Tax App. Trib., Sept. 22, 2011).

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