Tax Headlines


California ~ Corporate Income Tax: FTB Could Impose Alternate Apportionment Formula to Fairly Represent Business Activity

While proceeds from a taxpayer’s agricultural commodity futures trading were generally includible as gross receipts in the taxpayer’s sales factor for California corporation franchise tax apportionment purposes, the Franchise Tax Board (FTB) could impose an alternate apportionment formula that included only net gains from the trading activity in the taxpayer’s sales factor because including overall gross receipts from the trading activity did not fairly represent the extent of the taxpayer’s business activity in California.

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“Double Deduction” Doctrine Prohibited Expense Deduction Where Prior Capital Loss Deduction Represented Same Economic Loss to Taxpayer (Thrifty Oil Co., TC)

A consolidated group of oil companies that deducted a capital loss attributable to contingent environmental remediation expenses could not deduct those same expenses when they were actually incurred in subsequent tax years. The two deductions represented the same economic loss to the taxpayer and, therefore, the second deduction of the actual expenses was prohibited under the double-deduction doctrine. Under this rule, the same economic cost cannot be deducted twice unless Congress specifically allows it.

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California ~ Personal Income Tax: Deferral of Gain From Sale of Qualified Small Business Stock Held Unconstitutional

In a case of first impression, a California Court of Appeal held that California’s personal income tax deferral of capital gain from the sale of qualified small business stock violated the dormant Commerce Clause because it was only available to taxpayers that invested in corporations that had a significant presence in California.

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Corporation Not Entitled to Tax Credits for Rehabilitation of Historic Building; Corporation Not Bonafide Partner (Historic Boardwalk Hall, CA-3)

A corporation that entered into a partnership with a state entity to rehabilitate a landmark convention and exposition building was not entitled to claim a rehabilitation credit under Code Sec. 47 because the corporation was not a bona fide partner but, in reality, only purchased the tax credits from the entity.

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