Case Study: New York ALJ Rules C.V. Starr & Co.'s Ownership of AIG Stock Constitutes ‘Investment Capital’

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

In this article, Robert Willens discusses a recent case before the New York Division of Tax Appeals in which the parent of a group of insurance entities was held to own subsidiary stock as investment capital, such that dividends paid were properly reported as investment income for purposes of New York's franchise taxes. That the parent intended to reward, and did in fact provide performance incentives for, subsidiary senior executives through their participation in the stock's dividends and capital gains did not remove the parent's ownership of the stock from the realm of investment.