N.Y. General City Model 772/66 § 108: Deductions not subject to allocation

§ 108. Deductions not subject to allocation. (a) In computing

unincorporated business taxable income, there shall be allowed (without

allocation under section one hundred seven) deductions for reasonable

compensation not in excess of five thousand dollars for personal

services of the proprietor and of each partner actively engaged in the

unincorporated business, but the aggregate of such deductions shall not

exceed twenty per centum of the unincorporated business taxable income

computed without the benefit of any deductions under this section or the

unincorporated business exemptions under section one hundred nine.

(b) At the election of the taxpayer there shall also be allowed

(without allocation under section one hundred seven) either or both of

the items set forth in paragraphs one and two of this subdivision,

except that only one of such items shall be allowed with respect to any

one item of property.

(1) Depreciation with respect to any property such as described in

paragraph three of this subdivision, not exceeding twice the

depreciation allowed with respect to the same property for federal

income tax purposes. Such deduction shall be allowed only upon

condition that no deduction shall be allowed pursuant to section one

hundred six for depreciation of the same property, and the total of all

deductions allowed pursuant to this paragraph in any taxable year or

years with respect to any property shall not exceed its cost or other

basis.

(2) Expenditures paid or incurred during the taxable year for the

construction, reconstruction, erection or acquisition of any property

such as described in paragraph three of this subdivision which is used

or to be used for purposes of research or development in the

experimental or laboratory sense. Such purposes shall not be deemed to

include the ordinary testing or inspection of materials or products for

quality control, efficiency surveys, management studies, consumer

surveys, advertising, promotions or research in connection with

literary, historical or similar projects. Such deduction shall be

allowed only on condition that, for the taxable year and all succeeding

taxable years, no deduction shall be allowed pursuant to section one

hundred six on account of such expenditures or on account of

depreciation of the same property, except to the extent that its basis

may be attributable to factors other than such expenditures, or in case

a deduction is allowable pursuant to this paragraph for only a part of

such expenditures, on condition that any deduction allowable for federal

income tax purposes on account of such expenditures or on account of

depreciation of the same property shall be proportionately reduced in

determining the deductions allowable pursuant to section one hundred six

for the taxable year and all succeeding taxable years. With respect to

property which is used or to be used for research and development only

in part, or during only part of its useful life, the deduction allowable

pursuant to this paragraph shall be limited to a proportionate part of

the expenditures relating thereto. If a deduction shall have been

allowed pursuant to this paragraph for all or part of such expenditures

with respect to any property, and such property is used for purposes

other than research and development to a greater extent than originally

reported, the taxpayer shall report such use in the taxpayer's return

for the first taxable year during which it occurs, and the director of

finance may recompute the tax for the year or years for which such

deduction was allowed, and may assess any additional tax resulting from

such recomputation within the time fixed by subdivision (c) of section

one hundred thirty-one.

(3) Such deductions shall be allowed only with respect to tangible

property which is depreciable pursuant to section one hundred

sixty-seven of the internal revenue code, having a situs in the city and

used in the taxpayer's trade or business, (A) the construction,

reconstruction or erection of which is completed after December

thirty-first, nineteen hundred sixty-five, and then only with respect to

that portion of the basis thereof or the expenditures relating thereto

which is properly attributable to such construction, reconstruction or

erection after December thirty-first, nineteen hundred sixty-five, or

(B) acquired after December thirty-first, nineteen hundred sixty-five by

purchase as defined in section one hundred seventy-nine (d) of the

internal revenue code, if the original use of such property commenced

with the taxpayer, commenced in the city and commenced after such date.

(4) If the deductions allowable for any taxable year pursuant to this

subdivision exceed the taxpayer's unincorporated business taxable

income, determined without the allowance of such deductions, the excess

may be carried over to the following taxable year or years and may be

deducted (without allocation under section one hundred seven) in

computing unincorporated business taxable income for such year or years.

(5) In any taxable year when property is sold or otherwise disposed

of, with respect to which a deduction has been allowed pursuant to

paragraph one or two of this subdivision, the basis of such property

shall be adjusted to reflect the deductions so allowed, and if the basis

as so adjusted is lower than the adjusted basis of the same property for

federal income tax purposes, there shall be added to federal gross

income the amount of the difference between such adjusted bases.