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Colorado letter ruling provides guidance on apportionment of income from partnership interest

The Colorado Department of Revenue has issued a private letter ruling addressing the apportionment treatment of income from the partnership investment of a corporate partner. The ruling addresses the treatment of a corporate partner’s distributive share of operating income and the gain realized on disposition of the partnership interest. The corporate partner was directed to include in its sales factor its distributive share of operating income.

The gain on the sale of the partnership interest was excluded from the sales factor because (i) the sale was directed by the corporate partner’s new ownership outside the state, (ii) the gain was fully subject to tax in the states in which the partnership operated, and (iii) inclusion of the gain in Colorado’s apportionment factor would not fairly represent the corporate partner’s business activity in the state.