Foley Partner Lynn Gandhi was quoted in a Tax Notes article, “SALT Talk: VAS Holdings and Investee Apportionment,” about the Massachusetts Supreme Judicial Court case VAS Holdings & Investments LLC v. Commissioner involving the sale of a partnership interest.
VAS Holdings & Investments LLC (VASHI) is an S corporation that has no activity or shareholders residing in Massachusetts. They possessed a 50 percent interest in a Massachusetts LLC that they sold in 2013 for $37.3 million capital gain. The Department of Revenue apportioned 100 percent of the capital gain to Massachusetts based on their corporate excise and nonresident composite tax calculations using the “investee apportionment” rules.
Gandhi told Multistate Tax Commission Senior Counsel Bruce Fort that MeadWestvaco was the case she had thought of when reading VAS Holdings because the Supreme Court had held that a unitary relationship was required before the gain from the sale could be included in the company’s apportioned tax base in Illinois.
Fort said that he believes it’s important to look back at least two to three years rather than just to the single year of the capital gain. “I think you have to blend several years of where that LLC is operating,” he said.
But Gandhi objected, saying, “That’s how you get intangible gain after years and years of investment.”