Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
1998-1 - Comprehensive Corporation Income Tax Regulations
Rule 26-51-701 - MULTISTATE BUSINESS INCOME
Rule 2.26-51-701 - Business versus Nonbusiness Income

"Business income" means income arising from transactions and activities in the regular course of a taxpayer's trade or business. Business income also includes income from tangible and intangible property if the acquisition, management and disposition (sale, exchange, etc.) of such property is an integral part of the taxpayer's regular trade or business operations.

"Nonbusiness income" means all income other than business income.

The classification of income by labels, such as manufacturing income, compensation for services, sales income, interest, dividends, rents, royalties, gains, operating income, nonoperating income, etc., should not be the sole factor used in determining whether income is business or nonbusiness income. Income of any type or class and from any source is business income if it arises from transactions and activity occurring in the regular course of a trade or business. Accordingly, the critical element in determining whether income is "business income" or "nonbusiness income" is the identification of the transactions and activity which are the elements of a particular trade or business. In general, all transactions and activities of the taxpayer which are dependent upon or contribute to the operations of the taxpayer's economic enterprise as a whole constitute the taxpayer's trade or business and will be transactions and activity arising in the regular course of, and will constitute integral parts of, a trade or business.

Rental income from real and tangible property is business income if the property generating the rental income is used in the taxpayer's trade or business and is includable in the property factor.

Gain or loss from the sale, exchange or other disposition of real property or of tangible or intangible personal property constitutes business income if the property, while owned by the taxpayer, was used in the taxpayer's trade or business. However, if the property was utilized for the production of nonbusiness income before its sale, exchange or other disposition, the gain or loss will constitute nonbusiness income.

Interest income is business income where the intangible receiving the interest arises out of or was created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the intangible is related to or incidental to such trade or business operations.

Dividends are business income where the stock earning such dividends arises out of or was acquired in the regular course of the taxpayer's trade or business operations or where the purpose of acquiring and holding the stock is related to or incidental to such trade or business operations.

Patent and copyright royalties are business income where the patent or copyright receiving the royalties arises out of or was created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the patent or copyright is related to or incidental to such trade or business operations. For intangible income from related parties, see Income Tax Regulation 1996-3.