N.Y. Comp. Codes R. & Regs. tit. 20 § 112.13

Current through Register Vol. 46, No. 45, November 2, 2024

Section 112.13 - Modification for acquisition-related interest

Tax Law, § 612(t)

For purposes of the modification increasing Federal adjusted gross income required by section 612 (b)(30) of the Tax Law (see section 112.2[z] of this Part) and the modification reducing Federal itemized deductions required by section 615(c)(7) (see section 115.2[f] of this Article) the following terms have these meanings:

(a)Stock or asset acquisition means (except as provided in subdivision [b] of this section):

(1) a corporate acquisition by an acquiring person, as defined in section 208 (15) of the Tax Law (see section 1-2.12 of this Title), where the acquiring person is the taxpayer, a partnership of which the taxpayer is a partner, an S corporation of which the taxpayer is a shareholder, if the election provided for in section 660 (a) of the Tax Law is in effect with respect to such S corporation, or an estate or trust of which the taxpayer is a beneficiary, and if the value (based on cost) of such acquiring person's total interest (at any time during the year in which such acquisition occurred) in any target corporation, as described in section 208 (15) of the Tax Law (see section 1-2.12 of this Title), so acquired exceeds five million dollars;

(2) acquisition of (i) all or substantially all of the assets of a corporation (other than assets disposed of in the usual or regular course of business actually conducted by such corporation) pursuant to a vote by the shareholders of such corporation pursuant to section 909 of the Business Corporation Law or any similar statute of any other state or foreign nation, by an acquiring person, as such term is referred to in section 208 (15) of the Tax Law (see section 1-2.12 of this Title), where the acquiring person is the taxpayer, a partnership of which the taxpayer is a partner, an S corporation in which the taxpayer is a shareholder, if the election provided for in section 660 (a) of the Tax Law is in effect with respect to such S corporation, or an estate or trust of which the taxpayer is a beneficiary; or (ii) in the absence of such a statutory requirement, an asset of a corporation, such that immediately prior to the acquisition date such acquiring person owned less than 80 percent of the assets of the corporation (as of the date 18 months prior to such acquisition date) and immediately thereafter owned 80 percent or more of such assets (other than assets disposed of by such corporation in the usual or regular course of business actually conducted by such corporation) but, (iii) only where the value of the assets (valued at cost) so acquired exceeds five million dollars and only where such acquisition occurred on or after the effective date of the enactment of section 612 (t) of the Tax Law (i.e., April 19, 1989).

(b)Exceptions.

An acquisition is not a stock or asset acquisition as defined under subdivision (a) of this section if the taxpayer can demonstrate that:

(1) the ratio of average aggregate debt, as defined in section 612 (t)(4)(A) of the Tax Law, (see subdivision [d] of this section) to average aggregate equity, as defined in section 612 (t)(4)(B) of the Tax Law, (see subdivision [e] of this section) for the taxable year in which one or both of the events described in paragraphs (1) or (2) of subdivision (a) of this section occurred, does not increase by more than 100 percent over such ratio for the immediately preceding taxable year; or

(2) the ratio of average aggregate debt, as defined in section 612 (t)(4)(A) of the Tax Law, (see subdivision [d] of this section), to average aggregate assets, as defined in section 612(t)(4)(C), (see subdivision [f] of this section), for the taxable year in which one or both of the events described in paragraphs (1) or (2) of subdivision (a) of this section occurred, does not increase by more than 60 percent over such ratio for the immediately preceding taxable year; or

(3) the total acquisition-related interest as defined in section 612 (t)(3) of the Tax Law, (see subdivision [c] of this section) paid or accrued during the taxable year is less than one million dollars.

(c)Acquisition-related interest means:

(1) where the taxpayer is the acquiring person, as defined in section 208 (15) of the Tax Law (see section 1-2.12 of this Title), interest paid or accrued by the taxpayer other than personal interest and qualified residence interest deductible for Federal purposes under section 163 of the Internal Revenue Code;

(2) where a partnership, estate or trust or S corporation is the acquiring person and where the taxpayer is a member of such partnership, a beneficiary of such estate or trust or a shareholder in such S corporation, the taxpayer's distributive or pro rata share of interest paid or accrued by such partnership, estate, trust or S corporation.

(d)Average aggregate debt for a given taxable year means the sum of:

(1) the average debt of the taxpayer; plus

(2) the average debt of the target corporation.

In computing average aggregate debt, intercompany debt shall be eliminated.

(e)Average aggregate equity for a given taxable year means the sum of:

(1) the average equity of the taxpayer; plus

(2) the average equity of the target corporation.

In computing average aggregate equity, intercompany equity shall be eliminated.

(f)Average aggregate assets for a given taxable year means the sum of:

(1) the average assets of the taxpayer; plus

(2) the average assets of the target corporation.

In computing average aggregate assets, intercompany assets shall be eliminated.

(g) The value of assets shall be the value shown on the books and records of a corporation or other business entity using the method of accounting regularly used by such corporation or other business entity.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 112.13