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Instructions for Form NYC-2.1 - 2022 Page 3
a combined return, the determination of domicile is done on an entity-by-entity Part 2
basis. Thus, while the designated agent may be domiciled in New York City, Line 14 – If you made the safe harbor election by marking an inX
the combined group may claim this type of investment capital for assets owned Schedule A, line 1, multiply line 13 by 40% (.40) and enter the result. See
by other members of the combined group domiciled outside of New York City. the instructions for Schedule A.
If a taxpayer acquires stock that is a capital asset under IRC section 1221 Part 3
during the tax year, and owns that stock on the last day of the tax year, it will Lines 16 and 17 – For specific rules regarding the attribution of interest
be presumed, solely for purposes of determining whether that stock should deductions, see Finance Memoranda 16-2, 18-9 and 18-11. Do not enter
be classified as investment capital after it is acquired, that the taxpayer held less than zero.
that stock for more than one year. However, if the taxpayer can determine,
Schedule E – Investment capital
at the time it files its original return for the tax year in which it acquired the
Schedule E computes investment capital items to be included in Form
stock, whether or not it actually held the stock for more than one year, then
NYC-2 or NYC-2-A, Schedule D. The income generated from the in-
the presumption in the preceding sentence does not apply and the actual
vestments reported on Schedule E is reported on Schedule C. Invest-
period of time during which the taxpayer owned the stock is used to deter-
ment capital is not limited by any limitations applicable to investment
mine whether the stock could be classified as investment capital.
income or gross investment income.
Two situations in which the holding period presumption described above Note: Reverse repurchase agreements, securities borrowing agreements,
would not apply are: and their underlying securities, are business capital and cannot be listed
1) you still own the stock on the date you file your return, but as of that as investment capital.
date you have owned the stock for more than one year; and Investment capital means investments in stocks of non-unitary corporations that
2) you have sold the stock prior to the date you file your return. satisfy the definition of a capital asset under IRC section 1221 at all times the tax-
In both cases, you would use your actual holding period to determine payer owned such stock during the tax year, are held by the taxpayer for invest-
ment for more than one year, and the dispositions of which are, or would be,
whether the stock could be classified as investment capital. treated by the taxpayer as generating long-term capital gains or losses under the
When the presumption applies, the statute also includes an addback re- IRC. Stocks acquired on or after January 1, 2015 must have never been held for
quirement in the immediately succeeding tax year for both the presumed sale to customers in the regular course of business after the close of the day on
investment capital and the related income if the holding period require- which they are acquired. Such stocks must be clearly identified in the taxpayer’s
ment is not met. (§ 11-652(4)(d)). Alternatively, a taxpayer may file an records as stock held for investment in the same manner as required under IRC
amended return for the year in which the presumption applied to reflect section 1236(a)(1) for the stock of a dealer in securities to be eligible for capital
the fact that the stock is no longer investment capital. gain treatment (whether or not the taxpayer is a dealer of securities subject to sec-
Gross investment income cannot exceed the greater of 8% of your ENI or tion 1236). Generally, the identification must occur before the close of the day on
the income (prior to attribution or the safe harbor reduction) that New York which the stock was acquired, although floor specialists have seven business days
to make the identification. (§11-652(4)(a)).
City cannot constitutionally tax. (§§ 11-652(5)(a)(iii) and 11-652(4)(e)).
Investment income cannot exceed ENI (§11-652(5)(a)(i)). If you attrib- For nondealers not subject to IRC section 1236, holding stock acquired
ute interest deductions to investment capital or to gross investment in- prior to October 1, 2015, such identification must occur before October
come, and the amount attributed exceeds gross investment income, the 1, 2015. See Finance Memorandum 15-3, Investment Capital Identifi-
cation Requirements for the Corporate Tax of 2015. For stocks acquired
excess must be added back to ENI. (§11-652(5)(a)(ii)). by such taxpayers after October 1, 2015, additional identification peri-
In lieu of subtracting from investment income the amount of actual attrib- ods may apply (see Finance Memorandum 16-3 Additional Investment
uted interest deductions, you may make a revocable election (by complet- Capital Identification Periods for Certain Non-Dealers under the Busi-
ing Schedule A) to reduce your total gross investment income, determined ness Corporation Tax (Corporate Tax of 2015))
after applying the limitations in sections 11-652(5)(a)(iii) and 11-652.4(e),
by 40% (§11-652.(5)(b)). If you make this election, it also applies to gross Stock in a corporation that is conducting a unitary business with the taxpayer,
exempt CFC income and gross exempt unitary corporation dividends. If stock in a corporation that is included in a combined return with the taxpayer
you do not make this election because you do not have investment capi- pursuant to the commonly owned group election in section 11-654.3(3), and
tal, you willnot be precluded from making those other elections. stock issued by the taxpayer doesnot constitute investment capital.
If the taxpayer, or all the members of a combined group, owns or con-
Investment income does not include any amount treated as dividends trols, directly or indirectly, less than 20% of the voting power of the stock
pursuant to IRC section 78. (§11-652.(5)(c)). of a corporation, that corporation will be presumed to be conducting a
Note: If you made the safe harbor election, complete Parts 1, 2, 4, and 5. business that is not unitary with the business of the taxpayer for purposes
If you did not make the safe harbor election, complete Part 1 and Parts 3, of determining whether or not the stock constitutes investment capital.
4, and 5. Stock means an interest in a corporation that is treated as equity for fed-
eral income tax purposes. (§11-652(3-a)).
Part 1
Any liabilities which are directly or indirectly attributable to an item of in-
Note: The amounts entered in this part should be the amounts before vestment capital are deducted from that item of investment capital. If the
the 40% safe harbor reduction or any subtraction for the attribution of in- amount of those liabilities exceeds the amount of that item of investment cap-
terest deductions. Donot enter less than zero. ital, the amount of that item of investment capital will be zero. (§ 11-652.(4)(b))
Line 3 – Enter income (including gains in excess of losses) generated from If a taxpayer acquires stock that is a capital asset under IRC section 1221 dur-
investments identified in Schedule E, Part 1. ing the tax year, and owns that stock on the last day of the tax year, it will be
presumed, solely for purposes of determining whether that stock should be
Lines 6 and 7 – Enter income generated from investments identified in classified as investment capital after it is acquired, that the taxpayer held that
Schedule E, Part 2. stock for more than one year. (§11-652(4)(d)). However, if the taxpayer can
Line 11 – Enter dividend income generated from investments identified determine, at the time it files its original return for the tax year in which it ac-
in Schedule E, Part 3. quired the stock, whether or not it actually held the stock for more than one
year, then the presumption in the preceding sentence does not apply and the
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