New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter I - Franchise and Certain Business Taxes › Subchapter E - Franchise Tax On Transportation And Transmission Corporations › Part 41 - Allocation Of Gross Earnings By Telephone And Telegraph Corporations From Transmission Services › Section 41.6 - Rented real property and tangible personal property

Current through Register Vol. 46, No. 28, July 10, 2024
(a) In computing the property factor, real
				  property and tangible personal property rented to the taxpayer must be
				  included. The average value of real property and tangible personal property,
				  both within and without New York State, which is rented to the taxpayer is
				  determined by multiplying gross rents payable during the period covered by the
				  return by eight.
(b) The term gross
				  rents as used in this section means the actual sum of money or other
				  consideration payable, directly or indirectly, by the taxpayer or for its
				  benefit for the use or possession of the property and includes:
(1) Any amount payable for the use or
				  possession of real property or tangible personal property, or any part thereof,
				  whether designated as a fixed sum of money or as a percentage of sales, profits
				  or otherwise.
Example 1:A taxpayer, pursuant to the terms of a lease,
					 pays the lessor $1,000 per month and at the end of the year pays the lessor one
					 percent of its gross sales at that location. Its gross sales were $400,000,
					 resulting in a gross rent of $16,000.
(2) Any amount payable as additional rent or
				  in lieu of rent, such as interest, taxes, insurance, repairs or any other
				  amount required to be paid by the terms of a lease or other arrangement.
Example 2:A taxpayer, pursuant to the terms of a lease,
					 pays its lessor $24,000 a year. It also pays real estate taxes of $4,000 and
					 interest on a mortgage in the amount of $2,000. The taxpayer's gross rent is
					 $30,000.
(3) A
				  proportionate part of the cost of any improvement to real property or tangible
				  personal property made by or on behalf of the taxpayer which reverts to the
				  owner or lessor upon termination of a lease or other arrangement. The amount to
				  be included in gross rents is based on the unexpired term of the lease
				  commencing with the date the improvement is completed or the life of the
				  improvement if its life expectancy is less than the unexpired term of the
				  lease. However, where a building is erected on leased land by or on behalf of
				  the taxpayer, the value of the land is determined by multiplying the gross rent
				  by eight, and the value of the building is determined in the same manner as if
				  owned by the taxpayer. The proportionate part of the cost of an improvement
				  (other than a building on leased land) is generally equal to the amount of
				  amortization allowed in accordance with its regular accounting practices,
				  regardless of whether the lease contains an option for renewal.
Example 3:A taxpayer enters into a 21-year lease of certain
					 premises at a rental of $20,000 per year. After the expiration of one year, it
					 installs a new storefront at a cost of $10,000, which reverts to the owner upon
					 the expiration of the lease. Its gross rent for the first year is $20,000.
					 However, for subsequent years its gross rent is $20,500 ($20,000 annual rent
					 plus 1/20th of $10,000, the cost of the improvement apportioned on the basis of
					 the unexpired term of the lease).
Example 4:A taxpayer leases a parcel of vacant land for 40
					 years at an annual rental of $5,000, and erects a building on the land which
					 costs $600,000. The value of the land is determined by multiplying the annual
					 rent of $5,000 by eight. The value of the building is $600,000.