Opinion ID: 1176000
Heading Depth: 1
Heading Rank: 5

Heading: the richards had an idaho business situs.

Text: The Richards contend that even if the interest income was Idaho source income, they should not be subject to an Idaho tax because they did not have an Idaho business situs. The Idaho Income Administrative Regulations in place during 1989 and 1990 impose a limitation on the ability of the State of Idaho to tax non-residents on their Idaho source interest income. The regulation provided: c. Nonresident Individuals. Income from Idaho sources includes, but is not limited to: .... ix. Income from interest or dividends arising from a source within Idaho, if at the time that such income is realized, the individual has an Idaho business situs. The mere receipt of interest or dividend income from an Idaho source is not sufficient by itself to create an Idaho business situs. Idaho Income Tax Regulation 27A, 1.c.ix (1990). Thus, under the Commission's regulation, the Richards must have an Idaho business situs before their interest income is subject to an Idaho tax. During the years at issue in this dispute, I.C. § 63-3023(a) defined a business situs as including, among other things, being a stockholder of a corporation having income from Idaho sources having elected to file federal returns thereon pursuant to subchapter S of the Internal Revenue Code. I.C. § 63-3023(a) (1988). The Richards were shareholders in IFI, which is an Idaho corporation that earned income in Idaho and filed federal tax returns pursuant to subchapter S of the Internal Revenue Code. Despite these facts, the Richards contend that they did not have an Idaho business situs because they received the interest income from IFI in their capacity as creditors, rather than shareholders. The Richards do not offer any authority to support their position that individuals do not have an Idaho business situs if they receive interest income from a loan that they made to a corporation in which they were a shareholder. Furthermore, the Idaho Income Tax Act does not make such an exception. According to the definition set forth in I.C. § 63-3023(a), a business situs exists if the non-resident individual is a shareholder of an Idaho S corporation. The Richards did have an Idaho business situs.