W. Va. Code R. § 110-21-32

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-21-32 - West Virginia Adjusted Gross Income Of A Nonresident Individual

32.1. General. - The computation of the West Virginia adjusted gross income of a nonresident requires a separate determination of those items of income, gain, loss and deduction entering into said individual's federal adjusted gross income which are derived from or connected with West Virginia sources. The items thus determined are subject to the same modifications as are applicable for a resident individual under Subsection 12.2 and 12.3 and Sections 12a and 12b of these regulations.

32.1.1. Items Included In West Virginia Adjusted Gross Income. - The West Virginia adjusted gross income of a nonresident individual includes the net amount of income, gain, loss and deduction which enter into said individual's federal adjusted gross income, but limited to the portions of such items derived from or connected with West Virginia sources as determined under Subsection 32.2 of this regulation.

32.1.1.1. In addition to items received or accrued directly by the taxpayer, a nonresident individual's West Virginia adjusted gross income includes:

(1) his or her distributive share of partnership income, gain, loss and deduction described under Section 37 of these regulations,

(2) his or her distributive share of S corporation income, gain, loss and deduction described under Section 37a of these regulations, and

(3) his or her share of estate or trust income, gain, loss and deduction described under Section 39 of these regulations.

32.1.2. Example. - A, a nonresident, received during 1988 the following items of income:

(1) Income from salary paid in West Virginia...$10,000.00

During 1988, eighty percent (80%) of A's working days were required to be worked inside West Virginia.

(2) Distributive share of income from a partnership carrying on business both within and without West Virginia...$35,000.00

Seventy percent (70%) of the partnership income is properly allocated to West Virginia as seventy percent (70%) of the partnership business was transacted in West Virginia.

(3) Net rental income from an apartment house located in Ohio...$3,000.00

(4) A's share as a beneficiary under a testamentary trust. The trustee is Wheeling National Bank and all of the trust corpus is located within West Virginia. Income of the trust includes:

Net rentals from medical office building located in Wheeling...$10,000 A's share as 50% beneficiary...$5,000.00

(5) Dividends from stock of a West Virginia corporation...$6,000.00

The net amount of A's items of income and gain entering into his federal adjusted gross income derived from or connected with West Virginia sources is determined as follows:

(A) Salaries (determined with regard to days worked in West Virginia but not where payment was made) (80% X $10,000.00 = $8,000.00) ...$8,000.00

(B) Partnership income (determined on the basis of the partnership's allocation) (70% X $35,000.00 = $24,500.00) ...$24,500.00

(C) Income from an apartment house (entirely excluded, because it is Ohio rental property)...$ -O-

(D) Income from trust (limited to income from real or tangible personal property, see Subsection 32.2) ...$5,000.00

(E) Dividend from stock of a West Virginia corporation (entirely excluded, see Subsection 32.2)...$ -O-

Total SA's West Virginia adjusted gross income)... $37,500.00

32.2. Income And Deductions From West Virginia Sources.

32.2.1. General. - A nonresident individual's items of income, gain, loss and deduction derived from or connected with West Virginia sources are the items attributable to:

(1) the ownership of any interest in real or tangible personal property in this State; or

(2) a business, trade, profession or occupation carried on in this State; or

(3) personal services performed in this State. The determination as to whether items of income, gain, loss and deduction are derived or connected with West Virginia sources is made in accordance with Subsections 32.2.1.1 and 32.2.1.2 of this regulation.

32.2.1.1. Items Attributable To Real Or Tangible Personal Property In This State. - The West Virginia adjusted gross income of a nonresident individual includes items of income, gain, loss and deduction entering into his or her federal adjusted gross income which are attributable to the ownership of any interest in real or tangible personal property in this State. Thus, West Virginia adjusted gross income includes rental income from real or tangible personal property in this State after deducting ordinary and necessary expenses attributable to the ownership, operation or maintenance of such property. Income and deductions attributable to a lease-hold interest in property in this State are included, as well as income and deductions attributable to ownership in fee.

32.2.1.1.a. Interest income received from an installment sale of West Virginia real or tangible personal property must to the extent included in federal adjusted gross income be included in the West Virginia adjusted gross income of a nonresident individual because such income is source income.

32.2.1.1.b. The West Virginia adjusted gross income of a nonresident individual does not include items of income, gain, loss and deduction attributable to the ownership of any interest in real or tangible personal property located outside this State, even though rental payments or installment payments in respect of the property may be made from a point within this State by a resident individual, partnership or corporation.

32.2.1.2. Business, Trade, Profession Or Occupation Carried On In This State. - The West Virginia adjusted gross income of a nonresident individual includes items of income, gain, loss and deduction entering into his federal adjusted gross income which are attributable to a business, trade, profession or occupation carried on in this State.

32.2.1.2.a. The West Virginia adjusted gross income of a nonresident individual rendering services as an employee includes the compensation for services entering into his federal adjusted gross income, but only if, and to the extent that, his or her services were rendered within this State. Compensation for services rendered by a nonresident individual wholly without the State is not included in his or her West Virginia adjusted gross income, regardless of the fact that payment may be made from a point within the State or that the employer is a resident individual, partnership or corporation.

32.2.1.2.b. The West Virginia adjusted gross income of a nonresident individual includes the income of a West Virginia corporation which is an electing small business corporation for federal income tax purposes (S corporation).

32.2.1.2.c. If services are performed within West Virginia whether or not as an employee, the compensation for such services includible in federal adjusted gross income constitutes income from West Virginia sources.

32.2.1.2.d. Prizes, awards, and similar payments are derived from or connected with West Virginia sources so long as such gains are incident to the nonresident's presence or other activities within West Virginia.

32.2.1.2.e. If services were performed in part within West Virginia and in part without West Virginia, the portion of the compensation attributable to the services performed within West Virginia is determined in accordance with the ratio of days worked within West Virginia to the total days worked over the period during which the compensation was earned.

32.2.1.2.e.1. Example. - X, a nonresident individual, is a salaried employee of a North Carolina construction company. X works partly within West Virginia and partly within North Carolina. X earns twenty thousand dollars ($20,000) during tax year 1988. The amount allocable to West Virginia sources is that portion of X's salary income which the number of days worked in West Virginia bears to the total days worked during the year (excluding non-working days; such as, Saturdays, Sundays, holidays, vacations, sick leave, etc.) both within and without West Virginia. Out of the total of two hundred eighty (280) working days, X worked seventy (70) days within West Virginia. X determines his West Virginia income in the following manner:

Days actually worked during year in West Virginia...70

Total days worked during the year...280

Since the number of days worked within West Virginia amounts to twenty-five percent (25%) of X's total working days, X multiplies his total salary by twenty-five percent (25%) to arrive at the amount of his West Virginia income. His West Virginia income is five thousand dollars ($5,000) (25% X $20,000 = $5,000).

32.2.1.2.f. Pensions and retirement pay which are eligible for federal tax treatment under Section 72 of the Internal Revenue Code as "amounts received as an annuity" under an annuity, endowment or life insurance contract shall be considered to be income from annuities and not taxable to nonresidents.

32.2.2. Income From Intangible Personal Property. - Items of income, gain, loss and deduction attributable to intangible personal property of a nonresident individual, including annuities, dividends, interest, and gains and losses from the disposition of intangible personal property, do not constitute items of income, gain, loss and deduction derived from or connected with West Virginia sources except to the extent attributable to property employed in a business, trade, profession, or occupation carried on in this State. For a nonresident individual who is a shareholder of a corporation which is an electing small business corporation for federal income tax purposes (S corporation shareholders), undistributed taxable income of such corporation does constitute income or gain derived from West Virginia sources and a net operating loss of such corporation does constitute a loss or deduction derived from or connected with West Virginia sources.

32.2.3. Deductions with respect to capital losses, net long-term capital gains and net operating losses shall be based solely on income, gain, loss and deduction derived from or connected with West Virginia sources, but otherwise shall be determined in the same manner as the corresponding federal deductions.

32.3. Income And Deductions Partly From West Virginia Sources. - Because the West Virginia adjusted gross income of a nonresident individual takes into account only items of income, gain, loss and deduction derived from or connected with West Virginia sources, an apportionment and allocation of items of income, gain, loss and deduction are required when a nonresident individual carries on a business, trade, profession or occupation partly within and partly without the State.

32.3.1. Record Keeping. - If the taxpayer does not maintain books and records which clearly and accurately reflect the amount of business conducted within West Virginia, he may employ any method which is fair and equitable; however, the taxpayer must make a full disclosure and explanation of such method when filing his return. If the Tax Commissioner deems such method of allocation and apportionment to be inequitable, the Tax Commissioner may prescribe any method which clearly and accurately reflects the proportion of the net amount of the items of income, gain, loss and deduction attributable to the activities of the business carried on in West Virginia.

32.4. Purchase And Sale For Own Account. - A nonresident individual, other than a dealer holding property primarily for sale to customers in the ordinary course of his trade or business, is not deemed to be carrying on a business, trade, profession or occupation in this State solely by reason of the purchase and sale of property for his own account.

32.5. Husband And Wife. - Where a husband and wife determine their federal income tax on a joint return but determine their West Virginia personal income taxes separately, their West Virginia adjusted gross incomes must be determined separately, as if they had filed separate federal income tax returns and their federal adjusted gross incomes had been determined separately.

32.6. Military Pay. - Compensation paid for service in the Armed Forces of the United States, performed during active duty by an individual not domiciled in this State, shall not constitute income derived from West Virginia sources. Accordingly, if an individual not domiciled in this State is a member of the Armed Forces of the United States during active duty, such compensation received by him does not constitute income derived from West Virginia sources even though the service is performed in whole or in part within this State.

W. Va. Code R. § 110-21-32