Sobel v. Commissioner of Revenue Services

Citations

• 333 Conn. 712

Syllabus

The plaintiff taxpayer appealed to the trial court from the decision of the defendant, the Commissioner of Revenue Services, denying the plaintiff's protest in connection with the defendant's denial of state income tax credits that the plaintiff sought for nonresident income taxes paid to the state of New York on the distributive share of profits that he received for managing two limited partnerships. The plaintiff, who resided in Connecticut but worked in New York, was a member of a limited liability company, L Co., which served as the general manager for the limited partnerships. The limited partnerships, which operated as hedge funds and primarily traded their own stock index options, paid L Co. a share of their profits for L Co.'s services, and L Co., in turn, allocated to the plaintiff his distributive share of those profits. In 1997 and 1998, the plaintiff reported the income he received from L Co. as capital gains 333 Conn. 712 NOVEMBER, 2019 713 Sobel v. Commissioner of Revenue Services on his New York state income tax returns, paid taxes on that income to New York, and sought a credit against his Connecticut resident income taxes for the taxes he paid to New York during those years pursuant to the statute (§ 12-704 [a] [1]) allowing a resident of this state to receive a credit against nonresident income tax paid to another state when the nonresident income being taxed would otherwise be subject to taxation in Connecticut. The defendant disallowed the credit under § 12-704 (a) (1), reasoning that the plaintiff's income must be treated as if it derived from trading intangible property for his own account because the limited partnerships were trading their own intangible property and the charac- ter of the partnerships' income passed through to the income of their general partner, and that Connecticut does not tax nonresidents on income from the trading of intangible property for the nonresident's own account pursuant to statute (§ 12-711 [f]). In sustaining t