Escolar Documentos
Profissional Documentos
Cultura Documentos
DETERMINATION
TAT(H) 93-216(UB)
Tillman, A.L.J.:
Petitioner, Donald Trump, 725 Fifth Avenue, New York, New York
10019, filed, with the Commissioner of the New York City ("City")
Department of Finance (the "Commissioner" or "Respondent"), a
Petition for redetermination of a deficiency of Unincorporated
Business Tax ("UBT") under former Title S of Chapter 46 (now
Chapter 5 of Title 11) of the City Administrative Code (the "Code")
for the tax year ended December 31, 1984 (the "Tax Year").
A hearing was held before the Department of Finance's former
Hearings Bureau on April 29, 1992 and May 28, 1992. Each party
filed a post-hearing brief on July 30, 1992.
On October 1, 1992, jurisdiction over all open cases pending
before the Department of Finance's former Hearings Bureau was
transferred to the Administrative Law Judge Division of the Tax
Appeals Tribunal pursuant to the provisions of sections 168 through
172 of the City Charter, as amended by act of the New York State
legislature on June 28, 1992, Ch. 808, Laws 1992, section 140.
Although this case was transferred by the Commissioner as an open
case within this Tribunal's jurisdiction, the date stamp affixed by
the Department of Finance on the Petition (February 26, 1988)
suggested that the Petition may not have been timely filed.
Petitioner
was
therefore
requested
to
provide
additional
FINDINGS OF FACT
1.
Equitable Life Assurance Society of the United States
("Equitable") and Petitioner (collectively referred to as the
"Venturers") entered in a joint venture agreement, dated January
30, 1980 (the "Venture Agreement") to form the Trump-Equitable
Fifth Avenue Company (the "Venture") to develop a luxury mixed-use
building located at 721-725 Fifth Avenue ("Trump Tower").
The
purpose of the Venture was to: (a) acquire title to certain land
and existing buildings; (b) demolish the existing buildings; (c)
construct a new building -- Trump Tower -- to be owned in
condominium form; (d) sell residential condominium units therein;
and (e) lease office retail and other commercial condominium space
therein. Venture Agreement section 3.
2. The Venture Agreement states that the respective interests
of the Venturers in the assets, liabilities, profits, gains and
losses of the Venture are equal unless otherwise provided therein.
Venture Agreement section 5.5.
3.
The Venture Agreement granted each of the Venturers
options (the "Options") to purchase certain of the condominiums
units (the "Condominiums") at prices which were designed to
represent their cost to the Venture as defined therein ("Cost").
Venture Agreement section 9. Petitioner's option rights under the
Venture Agreement encompassed approximately two floors of Trump
Tower, whereas Equitable's option rights encompassed approximately
one floor.
4. The overall management and control of the business affairs
of the Venture vested collectively in the Venturers.
Venture
Agreement section 10.1.
5.
Equitable was responsible for general administration,
record keeping, and filing and payment of taxes for the Venture.
3
Former Regulation section 18-3(b) (now 19 RCNY section 2818(c)(2)) provides for an automatic six month extension of time to
file a UBT return, provided that a Form NYC-62 (Application for
Automatic Extension of Time to File for Individuals, Estates and
Trusts) is filed and a properly estimated tax is paid on or before
the due date of the return for the taxable period for which the
extension is requested.
6
Originally the date was set at "three weeks," but after Mr.
Mitnick requested a date certain, I chose June 18, 1992, to which
the Commissioner's representative agreed.
8
cannot be taxed on the Gain as a dealer since: (1) he did not have
an established place of business and regularly engage in the
purchase and resale of condominiums, and (2) the dealer status of
the Venture should not be attributed to him personally as a partner
therein. Finally, Petitioner argues that "Respondent stipulated
that it would withdraw the penalty if Respondent was unable to
produce the original return on or before June 18, 1992 (Tr. 44).
The original [Return] not having been produced by such date, the
penalties were withdrawn." Petitioner's supplemental reply brief.9
CONCLUSIONS OF LAW
An unincorporated business engaged in a trade, business,
profession or occupation wholly or partially carried on in the
City, whether conducted by an individual, partnership, or other
unincorporated entity, is subject to the UBT on its unincorporated
business taxable income. Former sections S46-2.0(a) and S46-3.0(a)
(now sections 11-502(a) and 11-503(a)) of the Code.
Petitioner asserts that he should not be subject to the UBT
because the Venture was subject to UBT and any compensation paid to
him is therefore subject to UBT at the Venture's level. Petitioner
thus appears to be suggesting that because the Venture cannot
deduct payments made to partners under former section S46-6.0(3)
(now section 11-507(3)) of the Code, double taxation would ensue
if he were to be taxed on his compensation from the Venture.
To buttress his argument, Petitioner argues that in all the
cases cited by Respondent (where a separate UBT tax was imposed on
a partner who performed services for a partnership of which he was
a member) the partnerships were exempt from the UBT and, thus, only
one level of tax was imposed at the partner level.
Chasanoff
Operating Company v. State Tax Comm., 79 A.D.2d 780 (3d Dpt. 1980);
Swid-Pearlman Management v. Tully, 67 A.D.2d 1022 (3d Dpt. 1979).
See also, Clement J. Wohlreich et al. v. Tully., 72 A.D.2d 825 (3rd
Dpt. 1979); Aaron Elkind v. State Tax Comm., 63 A.D.2d 789 (3d Dpt.
1978).
The Code, though, provides a mechanism to avoid double
taxation under the UBT, at least with respect to a service
partner's distributive share income. That mechanism is the former
additional exemption (allowed by former section 11-510(2) of the
Code) or the current credit (allowed by Code section 11-503(j)(1)).
However, the problem at issue is not one of double taxation,
but of no taxation. Because the Condominium was sold by Petitioner
and not the Venture, the Gain cannot be taxed to the Venture.10
Therefore, if Petitioner is correct that he is not taxable on the
Gain, the income realized from highly appreciated inventory
property extracted from the Venture only days before its sale would
escape all taxation under the UBT.11
The Appellate Level of this Tribunal has held that a partner
that provides management services to its partnership is engaged in
a trade or business for UBT purposes.
Matter of 680 Realty
10
Had the Venture not granted the Option, but instead sold
the Condominium and distributed the gain to Petitioner, the Venture
would have realized income subject to the UBT.
10
Partners and CRC Realty Capital Corp., TAT(E) 93-256(UB) and TAT(E)
95-33(UB), 96-1 N.Y.T.C. CT-61 (1996).12
Petitioner admits, on
page 1 of his supplemental reply brief, that: "Trump provided
management services to the Partnership [Venture]." Petitioner's
accountant testified that Petitioner received payments for
development services provided to the Venture which he took into
income for personal income tax purposes. By virtue of the provision of such services to the Venture, Petitioner is found to have
been engaged in a taxable trade or business for UBT purposes.13
The next question is whether -- as Respondent asserts -Petitioner received the Option in exchange for services rendered
to the Venture as part of his trade or business. Petitioner
does not dispute this assertion. Nor can a contrary finding
be reached given the paucity of the record14 resulting from
Petitioner's failure: (1) to introduce the Service Agreements into
evidence -- as was specifically requested;15 (2) to testify with
12
18
__________________________________
H. Gregory Tillman
Administrative Law Judge and
15