Current through Register Vol. XLI, No. 38, September 20, 2024
37.1.
Nonresident Partner Defined. - A nonresident partner is an individual who is a
partner in a West Virginia partnership or a partner in any partnership doing
business in West Virginia where that individual does not qualify as a resident
individual under the provisions of W. Va. Code '11-21-7.
37.2. Partnership Doing Business In West
Virginia Defined. - A partnership is doing business in West Virginia if it has
any revenue from West Virginia sources, or if it engages in any purposeful
revenue generating activity with the object of direct or indirect gain or
economic benefit in West Virginia.
37.3. Partnership Income And Deductions
Derived From West Virginia Sources. - The West Virginia adjusted gross income
of a nonresident partner of any partnership shall include his or her
distributive share of all partnership items of income, gain, loss and deduction
which entered into his or her federal adjusted gross income as filed for the
taxable year in question to the extent that the amount or amounts of such items
are derived from or connected with West Virginia sources; that is, from real or
tangible personal property having an actual situs in West Virginia or from a
business, trade, profession, or occupation carried on in this State, as
determined under Section 32 of these regulations.
37.4. Special Rules As To West Virginia
Sources. - In determining the sources of a nonresident partner's share of
partnership income, as either within or without West Virginia the following
shall apply:
37.4.1. No recognition or tax
effect shall be given to a provision in the partnership agreement which
characterizes payments to the partner as being employee compensation or other
consideration paid or distributable for the use of capital of a
partner.
37.4.2. Similarly, no tax
effect shall be given to a provision in the partnership agreement which
allocates to the nonresident partner, as income or gain from sources outside
West Virginia, a greater proportion of his distributive share of partnership
income or gain than the ratio of partnership income or gain from sources
outside West Virginia to partnership income or gain from all sources.
37.4.2.1. Example. - X is a nonresident
partner of a partnership located in West Virginia, sixty percent (60%) of the
business of which is from West Virginia sources. X's total distributive share
of partnership income from all sources is five thousand dollars ($5,000). X is
required to report on his West Virginia nonresident income tax return three
thousand dollars ($3,000) (60% of $5,000), as his partnership distributive
share, even though, under special provisions of the partnership agreement, his
share of the total West Virginia income of the partnership may have been fixed
at less than three thousand dollars ($3,000).
37.4.3. Similarly, no tax effect shall be
given to a provision in the partnership agreement which allocates to the
nonresident partner a greater proportion of a particular partnership item of
loss or deduction connected with West Virginia sources than his proportionate
share for federal income tax purposes of partnership loss or deduction
generally. If, for example, the proportionate share of a nonresident partner of
partnership losses is generally fifty percent (50%) for federal income tax
purposes, he is not permitted to deduct on his West Virginia income tax return
more than fifty percent (50%) of any particular partnership loss or deduction
connected with West Virginia sources, irrespective of any special provision of
the partnership agreement allocating a larger percentage of the specific loss
or deduction to him.
37.5. Partner's Modifications.
37.5.1. In determining the West Virginia
adjusted gross income of a nonresident partner, any modification described in
W. Va. Code '11-21-12
and Section 12 of these regulations which relates to a partnership item of
income, gain, loss or deduction shall be made with respect to such partner's
distributive share of the partnership. The modifications covered by these
Sections do not apply to any item a nonresident himself receives or incurs
directly, and these Sections do not apply to any item which, for federal income
tax purposes, is not treated as a partnership item.
37.5.2. The total applicable modification of
any partnership item of income, gain, loss, or deduction shall be set forth on
the partnership return, together with the respective portion thereof
distributable to each partner. Where any particular modification pertains to an
item includible in federal adjusted gross income, the partnership return shall
show each nonresident's portion thereof derived from or connected with West
Virginia sources.
37.6.
Alternate Methods. - Upon written application, the Tax Commissioner may
authorize the use of such other methods of determining a nonresident partner's
portion of partnership items derived from or connected with West Virginia
sources as he deems to be appropriate and equitable. Whenever a nonresident
partner's distributive share of partnership items of income, gain, loss or
deduction are so determined, any of the modifications relating thereto shall be
similarly determined.
