Skip to main content

Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667

Blog: www.EdKisscorni.com/Blog1
Email: Ed@EdKisscorni.com
 



 



 

 Blog 
Friday, March 30 2012

Capital Gain Excluded from SBT Tax Base

 

In Reynolds Metals Company, LLC v. Department of Treasury, Michigan Court of Appeals, No. 300001, March 20, 2012, affirming the lower court, the Court of Appeals held that a taxpayer was not a unitary business with a joint venture that was sold; therefore, the capital gain on the sale was properly excluded from the taxpayer's tax base under the Michigan Single Business Tax (SBT).  

 

The court noted that the unitary business principles applied to the SBT because, like income taxes, the value added under a value-added tax (such as the SBT) often cannot be assigned to a single source. The court examined whether the taxpayer, through its ownership of the subsidiary, operated a unitary business with the subsidiary's joint venture.  The factors to determine if a business is unitary are: functional integration, centralization of management, and economies of scale.  

 

The taxpayer did not participate in the day-to-day management decisions, employees did not overlap, and the joint venture had its own autonomy to determine policies.  Even though there was a limited exchange of technology and services, these were done at arm's-length terms.  With regard to economies of scale, the taxpayer did not benefit from central purchasing of materials or services.  Similarly, there was no joint production or sale of products. Accordingly, the court held that the companies were insufficiently connected to be a unitary business.  As such, the capital gain from the sale of the subsidiary was properly excluded from the SBT base.

Posted by: Ed Kisscorni AT 01:00 am   |  Permalink   |  0 Comments  |  Email
Comments:

Post comment
Name
 *
Email Address

Message
(max 750 characters)
*
* Required Fields
Note: All comments are subject to approval. Your comment will not appear until it has been approved.

 

Design Your Own Website, Today!
iBuilt Design Software
Give it a try for Free