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Line instructions for Form CT-3-ATT

CT-3/4-I (2006) Page 21 of 29

The term qualifying corporate debt instrument means all debt instruments

Line instructions for Form CT-3-ATT

issued by a corporation other than the following:

Schedules B, C, and D

— Instruments issued by the taxpayer or a DISC.

— Instruments that constitute subsidiary capital in the hands of the

taxpayer.

— Instruments acquired by the taxpayer for services rendered or for the

sale, rental, or other transfer of property if the obligor is the recipient of

Schedule B, Part 1

— Computation of investment

the services or property. However, when a taxpayer sells or otherwise

capital and investment allocation percentage

transfers property that is investment capital in the hands of the taxpayer,

and receives in return a corporate obligation issued by the recipient of

the property, the corporate obligation, if it is not otherwise excluded from

The term investment capital means the value of the taxpayer’s investments

investment capital, would constitute investment capital in the hands of

in stocks, bonds, and other corporate or governmental securities, reduced

the taxpayer.

by directly and indirectly attributable liabilities. Include in investment capital

— Instruments acquired for funds if (1) the obligor is the recipient of the

only those stocks, bonds, or other securities that are:

funds, (2) the taxpayer is principally engaged in the business of lending

1. Stocks and similar corporate equity instruments, such as business

funds, and (3) the obligation is acquired in the regular course of the

trust certificates, and units in a publicly traded partnership taxable as a

taxpayer’s business of lending funds. A taxpayer is principally engaged in

corporation pursuant to Tax Law section 208.1.

the business of lending funds if during the tax year more than 50% of its

gross receipts consist of interest income from loans, or net gain from the

2. Debt instruments (such as bonds) issued by the United States, the

sale or redemption of notes, or other evidences of indebtedness arising

District of Columbia, and any state, territory, or possession of the

from loans made by the taxpayer. Receipts may not include return of

United States, any foreign country, or any political subdivision or

principal or nonrecurring, extraordinary items.

governmental instrumentality of the foregoing.

— Accepted drafts (such as banker’s acceptances and trade acceptances)

3. Qualifying corporate debt instruments (see Section 1 below).

if the taxpayer is the drawer of the draft.

4. Options on any item described in 1, 2, or 3 above and not excluded from

— Instruments issued by a corporation that is a member of an affiliated

investment capital nor deemed to be cash (see Instruments deemed

group that includes the taxpayer. The term affiliated group means a

cash below), or on a stock or bond index or on a futures contract on such

corporation or corporations and the common parent thereof. The term

an index, unless the options are purchased primarily to diminish the

common parent means an individual, corporation, partnership, trust, or

taxpayer’s risk of loss from holding one or more positions in assets that

estate that owns or controls, either directly or indirectly, at least 80% of

constitute business or subsidiary capital.

the voting stock of the corporation or corporations. An affiliated group

5. Stock rights and stock warrants not in the possession of the issuer.

also includes all other corporations at least 80% of the voting stock of

6. Investments in stocks, bonds, and other securities of a LLC that is not

which is owned or controlled, either directly or indirectly, by one or more

more than 50% owned by the taxpayer and has elected to be treated as

of the corporations included in the affiliated group, or by the common

a corporation for federal tax purposes.

parent and one or more of the corporations included in the affiliated

group.

The term instrument includes stock and debt that is held in book entry form.

— Accounts receivable, including those held by a factor.

Investment capital does not include:

Instruments deemed cash

•

Stock issued by the taxpayer.

A debt instrument described above or included in investment capital must be

•

Stocks, bonds, or other securities constituting subsidiary capital. Debt

treated as cash if payable:

instruments issued by a subsidiary are also not subsidiary capital (and

•

are not investment capital) if the subsidiary claimed and deducted

on demand;

interest on the instruments for purposes of Tax Law Article 9-A, 32, or 33.

•

by its terms within six months and one day from the date the debt was

•

Securities of an individual, partnership, trust, or other nongovernmental

incurred; or

entity that is not a corporation pursuant to Tax Law section 208.1 (such

•

by its terms more than six months and one day from the date the debt

as FNMA and GNMA pass-through certificates).

was incurred, on each day in the tax year on and after the first day in

•

Stocks, bonds, and other securities of a DISC, or any indebtedness from

the tax year that is not more than six months and one day prior to the

a DISC.

maturity date (see Examples below and on page 22).

•

Regular and residual interests in a real estate mortgage investment

Cash, under certain circumstances, may be treated as investment capital;

conduit (REMIC) as defined in IRC section 860D.

see the instructions for line 6 on page 22.

•

Futures and forward contracts.

Examples

•

Stocks, bonds, and other securities held by the taxpayer for sale to

1. A calendar-year taxpayer owns a municipal bond with a maturity date

customers in the regular course of business.

of January 31, 2007. As of July 30, 2006, the first day not more than

Do not include stocks, bonds, and other securities issued by, and any

six months and one day before the maturity date, and on each day

indebtedness from, a QSSS in the computation of investment capital, if the

thereafter, the bond is deemed to be cash. Include the bond in Part 1,

QSSS is included in the parent’s return (see page 3).

but in computing the average value of the bond and attributable liabilities,

treat the taxpayer as no longer owning the bond on any date on or after

Schedule B, Part 1 categorizes investment capital into two sections:

July 30, 2006. The value of the bond should then be treated as cash for

•

Section 1: Corporate and governmental debt instruments

each day the taxpayer continues to own the bond after July 29, 2006.

•

Section 2: Corporate stock, stock rights, stock warrants, and stock

2. A taxpayer purchased a four-month qualifying corporate debt instrument

options

on the day it was issued, and on the maturity date renewed it for an

additional four-month term. The two four-month debt instruments are

deemed to be cash. Treat the renewal of the first four-month debt

instrument as the creation of a second, separate debt instrument, each

Schedule B, Part 1, Section 1

— Corporate and

of the two instruments being due within six months and one day of the

date on which the debt was incurred.

governmental debt instruments

3. A calendar-year taxpayer at all times during the tax year owns a

five-year qualifying, marketable corporate bond with a maturity date

Column A — List investments in governmental and qualifying corporate

of January 2, 2007. The taxpayer also owns corporate stock, but has

debt instruments (including certificates of deposit), and debt instruments

no cash at any point during the 2006 tax year. The bond is deemed to

issued by the U.S., any state, territory, or possession of the U.S., the

be cash as of July 1, 2006, the date six months and one day prior to

District of Columbia, or any foreign country or any political subdivision

maturity. The fair market value of the bond is $95,000 on March 31,

or government instrumentality of any of the foregoing. Do not include

2006, $90,000 on June 30, 2006, $98,000 on September 30, 2006, and

instruments deemed to be cash. See Instruments deemed cash below.

$100,000 on December 31, 2006. List the bond in Section 1, column A,

Form Ct-3/4-I - Instructions For Forms Ct-4, Ct-3, And Ct-3-Att - General Business Corporation Franchise Tax Returns - 2006 Page 7

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