Taxpayer (“TankCo”) leases tank and container cars. Corporation A owned 79% of TankCo and leased TankCo’s tank manufacturing plant until the plant was sold in 2008. During the tax years at issue (2006 – 2010), TankCo was affiliated with and Corporation A was a member of a larger group of corporations; however, TankCo didn’t join the group in filing state or federal consolidated income tax returns. TankCo protested the reclassification of its income from the 2008 sale of the plant from nonbusiness income to business income. TankCo argued that the sale was not conducted as part of its normal business operations, which consisted of leasing tank cars and container cars. Moreover, income from leasing the plant was only 5% of TankCo’s total leasing revenue. TankCo characterized the sale as a “partial liquidation” generating nonbusiness income. The Department requested documentation from TankCo – e.g. “board minutes, security and exchange commission filings, press releases, etc.” – to support the contention that the plant “was not acquired, managed, and disposed of by [TankCo] in a process integral to [TankCo’s] regular trade or business.” A consent resolution by the board of directors and bank statements showing money from the sale was deposited in the account of the corporation responsible for the group’s “cash sweeping” program failed “to establish that the sale of the plant in question did not meet either the transactional test or the functional test” discussed in May Dep’t Store Co. v. Indiana Dep’t of State Revenue, 749 N.E.2d 651 (Ind. Tax Ct. 2001). Therefore, the income from the plant’s sale was business income subject to apportionment. Letter of Findings No. 02-20130023 (posted August 28, 2013).
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Indiana Department of Revenue rules income from sale of tank car manufacturing plant was business income
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