§ 21 — Deductions

New York § 21

• Jurisdiction: New York
• Law GCM: General City Model 772/66
• Part 3: Financial Corporation Tax
• Subpart 1: Tax On State Banks, Trust Companies, Financial Corporations and Savings and Loan Associations

Text

§ 21. Deductions. In computing net income there shall be allowed as\ndeductions:\n 1. All the ordinary and necessary expenses paid or incurred during the\nyear in carrying on business, including a reasonable allowance for\nsalaries or other compensation for personal services actually rendered,\nand including rentals or other payments required to be made as a\ncondition to the continued use or possession for business purposes of\nproperty to which the taxpayer has not taken or is not taking title or\nin which such taxpayer has no equity.\n 2. All interest paid or accrued during the year on indebtedness.\n 3. Taxes, other than taxes on income or profits paid or accrued within\nthe year, imposed, first, by the authority of the United States, or of\nany of its possessions, or, second, by the authority of any state, or\nterritory, or any county, school district, municipality, or other taxing\nsubdivisions of any state or territory, not including those assessed\nagainst local benefits of a kind tending to increase the value of the\nproperty assessed, or, third, by the authority of any foreign\ngovernment, or, fourth, under the franchise tax on banking corporations\nimposed by article thirty-two of the tax law, or, fifth, any tax imposed\nunder this subpart.\n 4. Losses sustained during the year and not compensated for by\ninsurance or otherwise, if incurred in business; unless in order to\nclearly reflect the income the losses should in the opinion of the\ndirector of finance be accounted for as of a different period. No\ndeduction shall be allowed for any loss claimed to have been sustained\nin any sale or other disposition of shares of stock or securities where\nit appears that within thirty days before or after the date of such sale\nor other disposition the taxpayer has acquired substantially identical\nproperty, and the property so acquired is held by the taxpayer for any\nperiod after such sale or other disposition, unless such claim is made\nwith respect to a transaction made in the ordinary course of business.\nIf such acquisition is to the extent of part only of substantially\nidentical property, only a proportionate part of the loss shall be\ndisallowed.\n 5. Debts ascertained to be worthless and charged off within the year;\nor in the discretion of the director of finance a reasonable addition to\na reserve for bad debts. When satisfied that a debt is recoverable only\nin part, the director of finance may allow such debt to be charged off\nin part.\n 6. A reasonable allowance for the exhaustion, wear and tear of\nproperty used in business, including a reasonable allowance for\nobsolescence. In the case of any such property acquired before January\nfirst, nineteen hundred sixty-six, the amount of such deduction shall be\nequal to the deduction properly taken for such property in reporting the\ntax due pursuant to article nine-b of the tax law. With respect to\nproperty such as described in subdivision twelve of this section, this\ndeduction may be computed and allowed as provided therein.\n 7. If the gross income be derived from business carried on within and\nwithout the city, the deductions allowed by this section shall be\nallocated and determined on the basis of separate accounting for each\noffice or branch or, at the election of the taxpayer, under rules and\nregulations to be prescribed by the director of finance.\n 8. In the case of any taxpayer who establishes or maintains a pension\ntrust to provide for the payment of reasonable pensions to its\nemployees, there shall be allowed as a deduction (in addition to the\ncontributions to such trust during the taxable year to cover the pension\nliability accruing during the year, allowed as a deduction under\nsubdivision one of this section) a reasonable amount transferred or paid\ninto such trust during the taxable year in excess of such contributions,\nbut only if such amount (a) has not theretofore been allowable as a\ndeduction, and (b) is apportioned in equal parts over a period of ten\nconsecutive years beginning with the year in which the transfer or\npayment is made, or, under regulations of the director of finance,\ncovers not more than one-tenth of the total pension liability with\nrespect to services rendered prior to such taxable year; provided that\nsaid deduction shall be allowable only with respect to a taxable year\n(whether the year of the transfer or payment or a subsequent year) of\nthe taxpayer ending within or with a taxable year of the trust with\nrespect to which the trust, by reason of its purposes or activities, is\nexempt from federal income tax.\n 9. The amount of the amortizable bond premium on a bond for the year\nshall be allowed as a deduction as hereinafter provided. In computing\nsuch deduction, (a) the amount of the bond premium shall be determined\nwith reference to the amount of the basis (for determining loss on sale\nor exchange) of such bond, and with reference to the amount payable on\nmaturity or on earlier call date, with adjustments proper to reflect\nunamortized bond premium with respect to the bond, for the period prior\nto the date as of which this subdivision becomes applicable with respect\nto the taxpayer with respect to such bond, and (b) the amortizable bond\npremium of the year shall be the amount of the bond premium attributable\nto such year. The determination required in the preceding sentence shall\nbe made in accordance with the method of amortizing bond premium\nregularly employed by the holder of such bond, if such method is\nreasonable, and in all other cases in accordance with regulations of the\ndirector of finance prescribing reasonable methods of amortizing bond\npremium. This subdivision shall apply only if the taxpayer shall so\nelect, in accordance with regulations of the director of finance, and\nsuch election shall be made separately with respect to (1) bonds, the\ninterest of which is wholly taxable, and (2) bonds, the interest of\nwhich is wholly or partially tax exempt, for purposes of the income tax\nimposed by chapter one of the internal revenue code. If such election is\nmade with respect to any bond of the taxpayer described in clauses one\nor two hereof, it shall also apply to all bonds in the same class held\nby the taxpayer at the beginning of the first year to which the election\napplies and to all such bonds thereafter acquired by it and shall be\nbinding for all subsequent years with respect to all such bonds of the\ntaxpayer, unless, upon the application by the taxpayer, the director of\nfinance permits the taxpayer, subject to such conditions as the director\nof finance deems necessary, to revoke such election. As used in this\nsubdivision the term "bond" means any bond, debenture, note or\ncertificate or other evidence of indebtedness, issued by any corporation\nand bearing interest (including any like obligation issued by a\ngovernment or political subdivision thereof), with interest coupons or\nin registered form, but does not include any such obligation which\nconstitutes stock in trade of the taxpayer or any such obligation of a\nkind which would properly be included in the inventory of the taxpayer\nif on hand at the close of the year, or any such obligation held by the\ntaxpayer primarily for sale to customers in the ordinary course of its\ntrade or business.\n 10. In the case of a savings bank and savings and loan association,\namounts paid or credited to depositors or holders of accounts as\ninterest or dividends on their deposits or withdrawable accounts, if\nsuch amounts are withdrawable on demand subject only to customary notice\nof intention to withdraw.\n 11. A savings bank and savings and loan association may deduct in any\ntaxable year the amount of the repayment of any loan or advance from the\nmutual savings bank fund in computing its net income and the amount of\ninterest or dividends subject to the minimum tax under subdivision three\nof section twelve.\n 12. (a) At the election of the taxpayer there shall be deducted from\ngross income, or if gross income is derived from business carried on\nwithin and without this city, from the portion thereof allocated within\nthe city, depreciation with respect to any property such as described in\nparagraph (b) of this subdivision, not exceeding twice the depreciation\nallowed with respect to the same property for federal income tax\npurposes.\n (b) Such deduction shall be allowed only with respect to tangible\nproperty which is depreciable pursuant to section one hundred\nsixty-seven of the internal revenue code, having a situs in this city\nand used in the taxpayer's business, (i) the construction,\nreconstruction or erection of which is completed after December\nthirty-first, nineteen hundred sixty-five, and then only with respect to\nthat portion of the basis thereof which is properly attributable to such\nconstruction, reconstruction or erection after December thirty-first,\nnineteen hundred sixty-five, or (ii) acquired after December\nthirty-first, nineteen hundred sixty-five, by purchase as defined in\nsection one hundred seventy-nine (d) of the internal revenue code, if\nthe original use of such property commenced with the taxpayer, commenced\nin this city and commenced after such date.\n (c) If the deduction allowable for any taxable year pursuant to this\nsubdivision exceeds the taxpayer's net income computed without the\nallowance of such deduction and without the allowance of any deduction\npursuant to subdivision six of this section with references to the same\nproperty, the excess may be carried over to the following taxable year\nor years and may be deducted in computing net income for such year or\nyears.\n (d) In any taxable year when property is sold or otherwise disposed\nof, with respect to which a deduction has been allowed pursuant to this\nsubdivision, the gain or loss thereon shall be computed by adjusting the\nbasis of such property to reflect the deductions so allowed, and if the\ntaxpayer's gross income is derived from business carried on both within\nand without the city, shall be allocated within the city. Provided,\nhowever, that no loss shall be recognized for the purposes of this\nparagraph with respect to a sale or other disposition of property to a\nperson whose acquisition thereof is not a purchase as defined in section\none hundred seventy-nine (d) of the internal revenue code.\n