EFTA01122202.pdf

1. In general, the transfer of an interest in a partnership holding tangible personal property wi➢ not be subject to New York State sales tax because such a transfer is a transfer of intangible personal property. See, N.Y. Tax Regs. §§ 526.6(d)(4)(i), 526.8(c). 2. However, under New York law, an entity's separate existence wi➢ be recognized for tax purposes only so long as it has a legitimate business purpose. See, NYS AU (10/24/08), CCH New York Tax Reports, 1 406-279 (New York advisory opinion concluding that where a non-New York resident owns interests in an LLC or S corporation, the primary asset of which is New York-situs real property, such entity interests wi➢ not be includible in the individual's gross estate so long as the entity has a valid business purpose). 3. The test to be applied is the Moline Properties test, which states that an entity's separate existence will be recognized only "so long as [its] purpose is the equivalent of business activity or is followed by the carrying on of business by the corporation." Moline Properties v. Commissioner, 319 U.S. 436, 438-439 (1943). 4. This business purpose requirement has been extended to the sales and use tax context. Morris v. New York State Department of Taxation and Finance, 623 N.E. 2d 1157 (1993) (a sales tax case stating, "a corporation wi➢ be recognized as having a separate taxable identity unless it is shown to have had no legitimate business purpose either in its formation or its subsequent existence or that it was a sham or set up for tax avoidance"); See also, NYS AU 6/28/90, CCH New York Tax Reports, 1 253-261 (New York advisory opinion determining that a boat purchased by a DE corporation wholly owned by one stockholder would be disregarded and the stockholder would be liable for use taxes in connection with his ownership and use of the boat). EFTA01122202