DRS: 12-712(b)-1, Special rules as to nonresident partners

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Conn. Agencies Regs. ß 12-712(b)-1. Special rules as to nonresident partners.

(a) In determining whether a nonresident partnerís share of partnership income is derived from or connected with Connecticut sources, no effect is given to a provision in a partnership agreement which characterizes payments to a partner as either salary or other compensation paid or distributable for services rendered to the partnership by the partner, or as being interest or other consideration paid or distributable for the use of capital of a partner.

(b) Likewise, no effect is given to a provision in a partnership agreement which allocates to a nonresident partner, as income or gain derived from or connected with sources outside Connecticut, a greater proportion of such partnerís distributive share of partnership income or gain than the ratio of partnership income or gain from sources outside Connecticut to partnership income or gain from all sources. For example, if a nonresident partnerís distributive share of partnership income for federal income tax purposes is $5,000 and 60% of the partnership income is derived from or connected with Connecticut sources, the nonresident partner is required to report on the Connecticut nonresident income tax return $3,000 (60% of $5,000) as such partnerís distributive share of partnership income derived from or connected with sources within this state, even though, under the partnership agreement, such partnerís share of the total Connecticut income of the partnership may have been fixed at less than $3,000.

(c) Likewise, no effect is given to a provision in a partnership agreement which allocates to a nonresident partner a greater proportion of a particular partnership item of loss or deduction derived from or connected with sources within Connecticut than such partnerís proportionate share for federal income tax purposes of partnership loss or deduction generally. For example, if a nonresident partnerís distributive share of partnership loss for federal income tax purposes is $5,000, and 60% of the partnership loss is derived from or connected with Connecticut sources, the nonresident partner is required to report on the Connecticut nonresident income tax return $3,000 (60% of $5,000) as such partnerís distributive share of partnership loss derived from or connected with sources within this state, even though, under the partnership agreement, such partnerís share of the total Connecticut loss of the partnership may have been fixed at more than $3,000.

(d) While this section pertains to Section 12-712(b) of the general statutes, for purposes of supplementary interpretation, as the phrase is used in Section 12-2 of the general statutes, the adoption of this section is authorized by Section 12-712(a) of the general statutes.

(Effective November 18, 1994.)