Special rules as to nonresident partners

(a) In determining whether a nonresident partner's share of partnership income is derived from or connected with Connecticut sources, no effect is given to a provision in a partnership agreement which characterizes payments to a partner as either salary or other compensation paid or distributable for services rendered to the partnership by the partner, or as being interest or other consideration paid or distributable for the use of capital of a partner.

(b) Likewise, no effect is given to a provision in a partnership agreement which allocates to a nonresident partner, as income or gain derived from or connected with sources outside Connecticut, a greater proportion of such partner's distributive share of partnership income or gain than the ratio of partnership income or gain from sources outside Connecticut to partnership income or gain from all sources. For example, if a nonresident partner's distributive share of partnership income for federal income tax purposes is $5,000 and 60% of the partnership income is derived from or connected with Connecticut sources, the nonresident partner is required to report on the Connecticut nonresident income tax return $3,000 (60% of $5,000) as such partner's distributive share of partnership income derived from or connected with sources within this state, even though, under the partnership agreement, such partner's share of the total Connecticut income of the partnership may have been fixed at less than $3,000.

(d) While this section pertains to Section 12-712(b) of the general statutes, for purposes of supplementary interpretation, as the phrase is used in Section 12-2 of the general statutes, the adoption of this section is authorized by Section 12-712(a) of the general statutes.

(Effective November 18, 1994)

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