Determination of whether inequity is substantial.

(1) As used in this subdivision, the term inequity means the difference between:

(i) the amount, if any, of the taxpayer's share in the New York fiduciary adjustment computed pursuant to subdivision (a) or (b) of section 119.2 of this Part; and

(ii) the amount, if any, of the share of the same taxpayer in the New York fiduciary adjustment allocated to such taxpayer giving effect to the alternate method of attribution described in this section.

(3) An inequity is considered substantial in relation to the amount of the New York fiduciary adjustment only if, with respect to any one taxpayer, it represents at least 15 percent of the arithmetic total of all modifications comprising such fiduciary adjustment, determined without regard to whether the separate modifications have the effect of increasing or decreasing New York taxable income.

(4) In order for the fiduciary to be entitled to elect the alternate method, a substantial inequity need only be present as to one party, i.e., the estate or trust or one of the beneficiaries. The Federal fiduciary income tax return of a trust for 1979 consisted of the following items of income which constitute modifications required by section 612 of the Tax Law (Part 112 of this Article): The trust has two beneficiaries, A and B. Under the trust agreement, beneficiary A receives all the interest on United States bonds. Beneficiary B receives all the California bond interest. In accordance with section 119.2(a) of this Part, the New York fiduciary adjustment is allocated on the basis of the Federal distributable net income. This results in attributing $3,000 of the net New York fiduciary adjustment to A:

($15,000 × $5,000) / ($25,000) = $3,000 and $2,000 to B:

($10,000 × $5,000) / ($25,000) = $2,000 Use of the alternate method permitted by this section results in a New York State modification decreasing New York adjusted gross income in the amount of $15,000 to A, and a modification increasing New York adjusted gross income in the amount of $10,000 to B. The inequities with respect to both A and B are substantial in amount, in that each exceeds $1,000. With respect to A, the inequity amounts to $12,000 ($15,000 − $3,000 = $12,000). With respect to B, the inequity amounts to $12,000 ($10,000 + $2,000 = $12,000). The inequity is substantial in relation to the amount of the New York fiduciary adjustment, because the inequity to A amounts to $12,000 which exceeds $3,750 which is 15 percent of the arithmetic total of all modifications (15% of $25,000 = $3,750). In this example, the inequity to B is similarly substantial in the amount and in relation to the amount of the New York fiduciary adjustment, but in order for the fiduciary to be entitled to elect the alternate method, a substantial inequity need only be present as to one party, i.e., the estate or trust or one of the beneficiaries. The example in paragraph (a)(5) of this section also illustrates a situation where an inequity is considered substantial in amount and in relation to the New York fiduciary adjustment.