17 NCAC 05C .1702. APPORTIONABLE INCOME OR NONAPPORTIONABLE INCOME

For income tax purposes, whether a corporate partner's share of the partnership's net income is classified as apportionable income or nonapportionable income depends upon the facts in each case.  Such income is classified as nonapportionable income where the corporate partner limits its connection to the partnership to the mere investment of funds or property and does not regularly or materially participate in the day‑to‑day operation of the partnership.  Where the business of the partnership is directly or integrally related to the business of the corporate partner, the corporate partner's share of the partnership net income is classified as apportionable income.  When classified as apportionable income, the corporate partner's apportionment factors shall include its proportionate share of the partnership's property, payrolls and sales.  If such income is classified as nonapportionable income, it shall be included in the corporate partner's net taxable income and allocated in accordance with the allocation provisions of G.S. 105‑130.4.

 

History Note:        Authority G.S. 105‑130.4; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 2005; January 1, 1994; October 31, 1981.