N.Y. Tax Law § 617: Resident partners and shareholders of S corporations

§ 617. Resident partners and shareholders of S corporations. (a)

Partner's and shareholder's modifications. In determining New York

adjusted gross income and New York taxable income of a resident partner

or a resident shareholder of an S corporation (other than an S

corporation which is a New York C corporation), any modification

described in subsections (b), (c) or (d) of section six hundred twelve,

subsection (c) of section six hundred fifteen or paragraphs (2) or (3)

of subsection (d) of such section, which relates to an item of

partnership or S corporation income, gain, loss or deduction shall be

made in accordance with the partner's distributive share or the

shareholder's pro rata share, for federal income tax purposes, of the

item to which the modification relates. Where a partner's distributive

share or a shareholder's pro rata share of any such item is not required

to be taken into account separately for federal income tax purposes, the

partner's or shareholder's share of such item shall be determined in

accordance with his share, for federal income tax purposes, of

partnership or S corporation taxable income or loss generally. In the

case of a New York S termination year, his pro rata share of any such

item shall be determined under subsection (s) of section six hundred

twelve.

(b) Character of items. Each item of partnership and S corporation

income, gain, loss, or deduction shall have the same character for a

partner or shareholder under this article as for federal income tax

purposes. Where an item is not characterized for federal income tax

purposes, it shall have the same character for a partner or shareholder

as if realized directly from the source from which realized by the

partnership or S corporation or incurred in the same manner as incurred

by the partnership or S corporation.

(c) New York tax avoidance or evasion. Where a partner's distributive

share of an item of partnership income, gain, loss or deduction is

determined for federal income tax purposes by special provision in the

partnership agreement with respect to such item, and where the principal

purpose of such provision is the avoidance or evasion of tax under this

article, the partner's distributive share of such item, and any

modification required with respect thereto, shall be determined as if

the partnership agreement made no special provision with respect to such

item.