CHAPTER XXX

Text of the Individual Income Tax Law of New York State together with Treasury Decisions and Regulations pertaining to similar provisions of the Federal Income Tax Law.

(Note: Words added or substituted or other instances where the State Law differs from the Federal, are denoted by italics. The italics are the author's. Where the date March 1st, 1913, or similar dates, occur in the T. D.'s and Regulations, one may substitute, for state purposes, the date January 1st, 1919. In general where the Federal Law refers to "non-resident alien individual" the State Law employs the phrase "taxpayer other than a resident of the state." There have been included in the annotations some T. D.'s and Regulations which in terms apply only to corporations, but which, it is believed, will have some illustrative force (For comparison between State and Federal Law see table preceding this chapter.) Definitions.

SEC. 350. Definitions. For the purpose of this article and unless otherwise required by the context:

Comptroller defined.

1. The word "comptroller" means the state comptroller. (Source: New.)

Taxpayer defined.

2. The word "taxpayer" includes any person, trust or estate subject to a tax imposed by this article, or whose income is in whole or in part subject to a tax imposed by this article, and does not include corporations.

(Source: Fed. Rev. Act 1918, § 1.)

Under the federal law a taxpayer is any person, trust or estate subject to tax, and three chief classes of persons are recognized, to wit: individuals, partnerships and corporations. Corporations include associations, joint stock companies and insurance companies, but not partnerships properly so called. (Reg. 45, Rev. Art. 1501.)

The state law expressly excludes corporations from the definition of taxpayer under this article.

Military and naval forces defined.

3. The words "military or naval forces of the United States" include the marine corps, the coast guard, the army nurse corps, female, and the navy nurse corps, female, but this shall not be deemed to exclude other units otherwise included within such words.

(Source: Fed. Rev. Act 1918, § 1.)

Taxable year and fiscal year defined.

4. The words "taxable year" mean the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under this article. The words "fiscal year" mean an accounting period of twelve months, ending on the last day of any month other than December.

(Source: Fed. Rev. Act 1918, § 200.)

The return of a taxpayer is made and his income computed for his taxable year, which may be either the calendar year or his fiscal year. No fiscal year will, however, be recognized unless before its close it was definitely established as an accounting period by the taxpayer, and the books of such taxpayer were kept in accordance therewith. If a taxpayer has an accounting period, which is a fiscal year within the meaning of the statute, he must make his return on that basis. If he has no such fiscal year, he must make his return on the basis of the calendar year. Reg. 45, Rev. Art. 25.)

Fiduciary defined.

(From

5. The word "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person, whether individual or corporate, acting in any fiduciary capacity for any person, trust or estate.

(Source: Fed. Rev. Act 1918, § 200.)

Fiduciary is a term which applies to all persons that occupy positions of peculiar confidence toward others, such as trustees, executors and administrators, and a fiduciary for income tax purposes is a person who holds in trust an estate to which another has the beneficial title or in which another has a beneficial interest or receives and controls income of another, as in the case of receivers. A committee of the property of an incompetent person is a fiduciary. (Reg. 45, Rev. Art. 1521.)

Fiduciary distinct from agent.

There may be a fiduciary relationship between an agent and a principal, but the word "agent" does not denote 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. (Reg. 45, Rev. Art. 1522.)

"Paid," "paid or accrued," "received" defined.

6. The word "paid" for the purposes of the deductions and credits under this article, means "paid or accrued" or "paid or incurred," and the terms "paid or incurred" and "paid or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed, under this article. The term "received" for the purpose of the computation of net income under this article, means "received or accrued" and the term "received or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under this article.

(Source: Fed Rev. Act 1918, § 200. Words in italics new.) See also Deductions.

What may be deducted as "paid."

"Paid" or "actually paid" within the meaning of this title does not necessarily contemplate that there shall be an actual disbursement in cash or its equivalent. If the amount involved represents an actual expense or element of cost in the production of the income of the year it will be properly deductible even though not actually disbursed in cash, provided it is so entered upon the books of the company as to constitute a liability against its assets, and provided further that the income is also returned upon an accrued basis. If, in the course of its business, a corporation credits the accounts of individuals, firms or corporations with the amount of any expenses, interest, rentals, wages, etc., due them, thereby making them subject to the personal drawings of such creditors or if expenses actually incurred are vouchered in definite amounts, the amount so credited or vouchered may be treated as paid, and if the amounts so credited or vouchered are expenses incurred concurrently with and in the production of the income of the year, they may be allowably deducted therefrom. This ruling must not be construed to allow as a deduction any accrued charges

which if paid in cash or otherwise, would not be deductible. (Article 126, Regulations 33, Rev., Jan. 2d, 1918.)

Amounts which accrue on the books monthly or at other stated periods to meet fixed annual or other charges;

and

Reserves maintained to meet liabilities, the amount of which and date of payment or maturity of which is not definitely determined or determinable at the time the liability is incurred;

may be deducted from gross income as coming under this definition of "paid" or "paid or incurred."

But such amounts deductible must approximate as nearly as possible the actual liabilities for which the accruals are made. Where such deductions are made on an accrual basis the income also must be returned on an accrual basis, and the same practice is to be consistently followed year after year.

Sinking funds or reserves set up to meet additions, betterments, shrinkage in values, losses from bad debts, or other capital obligations, will in no event be allowed as deductions. (T. D. 2433, Jan. 8, 1917.)

No particular bookkeeping or accounting system required. Any system of accounting which is not consistent with the purpose and intent of the rules set out in this title, and with the general rules set out in these regulations for the ascertainment of net income, will not be accepted as a correct basis for making returns. (Art. 128, Reg. 33, Rev., Jan. 2, 1918.) Resident defined.

7. The word "resident" applies only to natural persons and includes for the purpose of determining liability to the tax imposed by this article upon or with reference to the income of any taxable year, commencing with the year nineteen hundred and nineteen, any person who shall, at any time on or after January first and not later than March fifteenth of the next succeeding calendar year, be or become a resident of the state.

(Source: New. See also chapter on Residence, supra.)

Resident aliens.-"Residence," as used in Subdivision 1, Paragraph A of the Act of October 3, 1913 is held to be

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"That place where a man has his true, fixed and permanent home and principal establishment, and to which whenever he is absent, he has the intention of returning; and indicates permanency of occupation as distinct from lodging or boarding, or temporary occupation."

For the purposes of the income tax,-it is held that where for business purposes or otherwise, an alien is permanently located in the United States; has there his principal business establishment and is there permanently occupied or employed, even though his domicile may be without the United States he will be held to be within the definition of—