Nonresident Corporate Partner Subject to NYC Tax on Sale of Partnership Interest

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In Matter of Goldman Sachs Petershill Fund Offshore Holdings (Delaware) Corp., the New York City Tax Tribunal held that an upper-tier partnership’s passive corporate partner was subject to the New York City General Corporation Tax (GCT) on the upper-tier partnership’s sale of an interest in a lower-tier partnership that was doing business in New York City.

The GCT is imposed on the corporate partners of a partnership doing business in New York City. The administrative law judge rejected the corporate partner’s argument that the upper-tier partnership’s investment in the lower-tier partnership should be analogized to an investment in corporate stock; instead, the judge held that the corporate partner’s distributive share of capital gain from the upper-tier partnership’s sale of the lower-tier partnership (as well as its distributive share of pre-sale income, deductions, gains, and losses from the lower-tier partnership) was subject to the GCT.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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