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New Jersey Tax Court holds gains from deemed asset sale of S Corporation constitutes non-operational income

The New Jersey Tax Court has held that the gain from a deemed asset sale was non-operational income and therefore not subject to apportionment. Because the corporation was a New Jersey-based S corporation, the entire gain was allocated to New Jersey on the nonresident shareholders’ Gross Income Tax returns pursuant to the New Jersey Corporation Business Tax rules governing the sourcing of non-operational income.