Idaho Administrative Code › Title IDAPA 35 - Tax Commission, State › Rule 35.01.01 - INCOME TAX ADMINISTRATIVE RULES › Section 35.01.01.570 - SPECIAL RULES: SALES FACTOR

Current through August 31, 2023
Section
				63-3027(18),
				Idaho Code
01.
Net Gains
.
			 If gains and losses on the sale of liquid assets are not excluded from the
			 sales factor by other provisions of this rule, such gains or losses are treated
			 as provided in Subsection
			 570.02 of this rule. This
			 subsection does not provide rules relating to the treatment of other receipts
			 produced from holding or managing such assets. If a taxpayer holds liquid
			 assets in connection with one (1) or more treasury functions of the taxpayer,
			 and the liquid assets produce apportionable income when sold, exchanged or
			 otherwise disposed, the overall net gain from those transactions for each
			 treasury function for the tax period is included in the sales factor. For
			 purposes of Subsection
			 570.02 of this rule, each
			 treasury function is considered separately. (4-6-23)
a. For purposes of Subsection
			 570.02 of this rule, a liquid
			 asset is an asset, other than functional currency or funds held in bank
			 accounts, held to provide a relatively immediate source of funds to satisfy the
			 liquidity needs of the trade or business. Liquid assets include foreign
			 currency, and trading positions therein, other than functional currency used in
			 the regular course of the taxpayer's trade or business; marketable instruments,
			 including stocks, bonds, debentures, bills, notes, options, warrants, futures
			 contracts; and mutual funds which hold such liquid assets. An instrument is
			 considered marketable if it is traded in an established stock or securities
			 market and is regularly quoted by brokers or dealers in making a market. Stock
			 in a corporation that is unitary with the taxpayer or has a substantial
			 business relationship with the taxpayer is not considered marketable stock.
			 (4-6-23)
b. For purposes of
			 Subsection 570.02 of this rule, a treasury
			 function is the pooling and management of liquid assets for the purpose of
			 satisfying the cash flow needs of the trade or business, such as providing
			 liquidity for a taxpayer's business cycle, providing a reserve for business
			 contingencies, and providing for business acquisitions. A taxpayer principally
			 engaged in the trade or business of purchasing and selling instruments or other
			 items included in the definition of liquid assets set forth herein is not
			 performing a treasury function with respect to income so produced.
			 (4-6-23)
c. Overall net gain refers
			 to the total net gain from all transactions incurred at each treasury function
			 for the entire tax period, not the net gain from a specific transaction.
			 (4-6-23)
d. Examples. (4-6-23)
i. A taxpayer manufactures various gift
			 items. Because of seasonal variations, the taxpayer must keep liquid assets
			 available for later inventory acquisitions. Because the taxpayer wants to
			 obtain a return on available funds, the taxpayer acquires liquid assets, which
			 are held and managed in State A. The net gain resulting from all gains and
			 losses on the sale of the liquid assets for the tax year will be reflected in
			 the denominator of the sales factor and in the numerator of State A.
			 (4-6-23)
ii. A stockbroker acts as
			 a dealer or trader for its own account in its ordinary course of business. Some
			 of the instruments sold are liquid assets. Subsection
			 570.02 of this rule does not
			 operate to classify those sales as attributable to a treasury function.
			 (4-6-23)