PARTNERSHIPS

ART. 226. Partnerships.- Partnerships as such are not subject to taxation under the Tax Law, but are required to make returns of income. (Tax Law, section 368, and articles 230 and 231.) Individuals carrying on business in partnerships, are, however, taxable upon their distributive shares of the net income of such partnerships, whether distributed or not, and are required to include such distributive shares in their returns. The net income of a partnership shall be computed in the same manner and on the same basis as the net income of an individual, except that the deduction of charitable contributions is not permitted. Resident individuals who are members of partnerships may be required by the Comptroller to make a return stating the gross receipts and the net gains or profits of the partnership for the taxable year. (Tax Law, section 364, and articles 11-14.)

A resident member of a partnership must include in his return his distributive share of the profits of such partnership even though it do no business within the State of New York and derive no income from sources within the State.

Every distribution (or credit) shall be deemed to be a ratable distribution of income of each kind received during the year.

ART. 227. Limited partnerships. All limited partnerships, whether of the type authorized by the statutes of New York and Illinois or of Pennsylvania and Michigan and most other states, are partnerships and not corporations within the meaning of the statute.

ART. 228. Association distinguished from partnership.-An organization, the partnership interests in which are not transferable without the consent of the members, is a partnership and not an association. Any so-called association or organization not taxable under article 9-a of the Tax Law and not exempted under such article, will be regarded as a partnership within the meaning of the Income Tax Law. The members of such partnerships will be required to include in their returns their share of the profits of such partnerships, whether distributed or undistributed. Such partnerships will be required to file returns in the same manner as all other partnerships.

ART. 229. Distributive shares of partners. The distributive share of the net income of a partnership which a partner is

required to include in his return is his proportionate share of the net income of the partnership, either (a) for the taxable year upon the basis of which the partner's net income is computed, or (b) if the partner's net income is computed upon the basis of a taxable year different from that upon the basis of which the net income of the partnership is computed, for the taxable year of the partnership ending within the taxable year upon the basis of which the partner's net income is computed. Amounts earned and distributed to a partner by a partnership after the end of its taxable year and before the end of his corresponding taxable year should be accounted for both by the partnership and by the partners in their returns for their next succeeding taxable years.

ART. 230. Partnership returns.- Every partnership deriving income (a) from property owned within the State of New York, or (b) from a business, trade, profession or occupation carried on within the State of New York must make a return of income, regardless of the amount of its gross or net income and regardless of the residence of the partners. The return shall be on Form 204 and shall be sworn to by one of the partners. If the partnership (a) has a nonresident member, and (b) carries on business (as "business carried on" is defined in article 415) both within and without the State of New York, its return shall be accompanied by a schedule of apportionment on Form 204a. Such return shall be made for the fiscal year of the partnership, that is, for its annual accounting period (fiscal year or calendar year as the case may be), irrespective of the taxable years of the partners. (Tax Law, section 368.) If the partnership makes any change in its accounting period it shall make its return in accordance with the provisions of the Tax Law, section 370, and article 529.

ART. 231. Contents of partnership return. The return of a partnership shall state specifically (a) the items of its gross income enumerated in section 359 of the Tax Law; (b) the deductions enumerated in section 360 other than the deductions provided in paragraph 10 of that section; (c) the names and addresses of the individuals who would be entitled to share in the net income of the partnership if distributed; (d) the amount of the distributive share of such net income of each such individual; and (e) such other facts as are required by Form 204. (See also Tax Law, section 371, and articles 541-544.)

ART. 232. Taxation of partners in partnership with fiscal year ending in 1919.- If the fiscal year of a partnership began in the calendar year 1918 and ended in the calendar year 1919, the tax for the calendar year 1919 applies to the amount of each partner's distributive share of such net income of the partnership attributable to the calendar year 1919. The amount of each partner's distributive share of the net income of the partnership for such fiscal year attributable to the calendar year 1919 is found by determining the net income of the partnership for its entire fiscal year in accordance with the law and the distributive share thereof of each partner, and then taking such proportion of that distributive share as the part of the fiscal year falling within the calendar year 1919 bears to the full fiscal year. (Tax Law, section 364, and article 527.)

ART. 233. Charitable contributions by partnerships. In computing the net income of partnerships, charitable contributions may not be deducted. Each partner may, however, take as a deduction on his personal return his proportionate share of the charitable contributions made by the partnership, subject to the limitations contained in article 201.

ESTATES AND TRUSTS

ART. 240. Fiduciary. "Fiduciary" is a term which applies to all persons that occupy positions of peculiar confidence and trust toward others, such as guardians, trustees, executors, administrators, receivers, conservators or any other person, whether individual or corporate, acting in any fiduciary capacity for any person, trust or estate. A committee of the property of an incompetent person is a fiduciary. (Tax Law, section 365.)

ART. 241. Fiduciary distinguished from agent.— There may be a fiduciary relationship between an agent and a principal, but the word "agent" does not denote a fiduciary. A fiduciary relationship cannot be created by a power of attorney. An agent having entire charge of property, with authority to effect and execute leases with tenants entirely on his own responsibility and without consulting his principal, merely turning over the net profits from the property periodically to his principal by virtue of authority conferred upon him by a power of attorney, is not a fiduciary within the meaning of the statute. In cases where no legal trust has been created in the estate controlled by the agent and attorney the liability to make a return rests with the principal.

ART. 242. Classification of income of estates and trusts. For the purpose of the income tax, income of estates and trusts may be divided into two classes:

First.-Income, the tax upon which is imposed upon the estate or trust and the tax paid by the fiduciary, consisting of

(a) Income received by estates of deceased persons during the period of administration or settlement except as provided in "f” below;

(b) Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests;

(c) Income held in trust for future distribution under the terms of the will or trust.

Second.-Income, the tax upon which is imposed upon and paid by the beneficiaries, consisting of

(d) Income which is to be distributed to beneficiaries periodically whether or not at stated intervals;

(e) Income collected by the guardian of an infant to be held or distributed as the court may direct;

(f) Income of the estate of any deceased person which during the period of administration or settlement is properly paid or credited to any legatee, heir or other beneficiary.

ART. 243. Resident and nonresident estates and trusts distinguished. For the purpose of the income tax estates and trusts are (a) resident estates and trusts or (b) nonresident estates and trusts. If the decedent was at the time of his death a resident of New York State, his estate is a resident estate and any trust created by his will is a resident trust. If the decedent was at the time of his death a nonresident, his estate is a nonresident estate and any trust created by his will is a nonresident trust. If the creator of a trust was at the time the trust was created a resident of New York State, the trust is a resident trust. Conversely, if the creator of a trust was at the time the trust was created a nonresident of the State, the trust is a nonresident trust. The residence or situs of the fiduciary does not in any sense control in the classification of estates and trusts as resident or nonresident.

ART. 244. Income of estates and trusts taxed to fiduciary. In the case of estates or trusts falling within subdivisions a, b and c of article 242, the fiduciary is required to make return on Form 200 or 201 as prescribed in article 246 and pay the tax on the taxable income of such estate or trust. The imposition of the tax is not affected by the fact that an ultimate beneficiary may be a person not subject to tax. Where under the terms of the will or deed, the trustee may in his discretion distribute the income or accumulate it, the amount actually distributed is taxable to the beneficiaries and only the amount accumulated is taxable to the fiduciary.

A statutory allowance paid a widow out of the corpus of the estate is not deductible from gross income. As an intestate's real estate does not pass to his administrator, upon a sale by the heirs, whether before or after settlement of the estate, each heir is taxed individually on any profit derived. If such an estate or trust is a resident as defined in article 243 its income from all sources both within and without the State is taxable. If the estate or trust is a nonresident as defined in article 243, only its