Allocation and apportionment.

(1) Where the ordinary income portion of a lump sum distribution is derived partly from New York State sources, the excess of the total taxable amount over the minimum distribution allowance must be allocated to New York State by multiplying such amount by a fraction:

(i) the numerator of which is the portion of the individual's compensation, net income from business or partnership distribution allocated to New York State on his New York State personal income tax return (in accordance with the provisions of sections 132.15 and 132.17 through 132.19 of this Article) during a period consisting of the portion of the taxable year prior to the date the distribution became payable and the three taxable years immediately preceding the year in which the distribution was made; and

(ii) the denominator of which is the individual's total compensation, net income from business or partnership distribution from such source ( i.e., before the allocation referred to in subparagraph [i] of this paragraph) received during such period for services performed both within and without New York State. The following examples illustrate the application of the provisions of this paragraph. A nonresident taxpayer who filed his Federal and New York State income tax returns on a calendar-year basis carried on a business both within and without New York State. On September 1, 1980, he terminated his business operations and, as a result, received a lump sum distribution from a qualified plan in such taxable year. The taxpayer elected to use the special 10-year averaging method with respect to the ordinary income portion of the lump sum distribution for 1980, Federal income tax purposes. Assuming that the taxpayer reported the amounts shown in the following tabulation on his New York State nonresident personal income tax returns for the taxable years 1977 through 1980, the fraction to be applied in accordance with the provisions of this subdivision is $210,000/$330,000. A nonresident taxpayer who filed his Federal and New York State income tax returns on a calendar-year basis was employed by a New York State company and performed services both within and without New York State until his retirement on March 1, 1980. Upon retirement, the taxpayer received a lump sum distribution-from a qualified plan. He elected to use the special 10-year averaging method with respect to the ordinary income portion of the lump sum distribution for Federal income tax purposes for the taxable year 1980. Assuming that the taxpayer reported the amounts shown in the following tabulation on his New York State nonresident personal income tax returns for the taxable years 1977 through 1980, the fraction to be applied in accordance with the provisions of this subdivision is $142,000/$156,000.

(2) For purposes of this subdivision, the individual's compensation, net income from business or partnership distribution attributable to New York State must be determined separately for each taxable year or portion of a year. However, the fraction determined in accordance with paragraph (1) of this subdivision may be based on a period of time greater than the period referred to therein if the taxpayer establishes, to the satisfaction of the Tax Commission, the amount of compensation, net income from business or partnership distribution (on which the lump sum distribution is based) for each taxable year in such longer period of time and the amount of such income allocable to New York State in each such taxable year determined in accordance with the applicable provisions of section 132.15, 132.17, 132.18 or 132.19 of this Article.

(3) Where an allocation or apportionment is determined in accordance with the provisions of this subdivision, the taxpayer must prepare a schedule, identified as Lump Sum Distribution Allocation Schedule, which shows the calculation required under this subdivision. This schedule and form IT-230 or IT-230.1 must be attached to the taxpayer's New York State nonresident personal income tax return filed for the taxable year.