IDAPA 35.01.01.266 — IDAHO SOURCE INCOME OF NONRESIDENT AND PART-YEAR RESIDENT INDIVIDUALS --

INCOME FROM INTANGIBLE PROPERTY (RULE 266).
Section 63-3026A(3), Idaho Code
01.
In General. Gross income from intangible property generally is sourced to the state of the owner's
domicile. The following are exceptions to this rule.
(4-6-23)
a.
If the intangible property is employed in the owner's trade, business or profession carried on within
Idaho, any income derived from or related to the property, including gains from the sale thereof, constitutes income
from Idaho sources. For example, if a nonresident pledges stocks, bonds or other intangible personal property as
security for the payment of indebtedness incurred in connection with the nonresident's Idaho business operations, the
intangible property has an Idaho situs and the income derived therefrom constitutes Idaho source income.
(4-6-23)
IDAHO ADMINISTRATIVE CODE
IDAPA 35.01.01
Idaho State Tax Commission
Income Tax Administrative Rules
Section 267
Page 39
b.
Interest income from the sale of real or tangible personal property on the installment method is
treated as income from the sale of the underlying property and is therefore sourced to Idaho if the underlying property
was located in Idaho when sold.
(4-6-23)
c.
Interest income paid by an S corporation to a shareholder or by a partnership to a partner is sourced
to Idaho in proportion to the Idaho apportionment factor of the partnership or S corporation.
(4-6-23)
d.
Gains or losses from the sale or other disposition of a partnership interest or stock in an S
corporation are sourced to Idaho by using the Idaho apportionment factor for the entity for the taxable year
immediately preceding the year of the sale of the interest or stock. However, a gain or loss from the sale of an interest
in a publicly traded partnership transacting business in Idaho is Idaho source income to the extent of the gain or loss
determined under Section 751, Internal Revenue Code, multiplied by the Idaho apportionment factor of the
partnership for the year in which the sale occurred.
(4-6-23)
02.
Interest Income Earned on a Bank Account.
(4-6-23)
a.
Personal Bank Accounts. Interest income earned on a personal bank account is sourced to the
owner's state of domicile. A personal bank account is an account that is not used in connection with a business.
(4-6-23)
b.
Business Bank Accounts. If the business is a sole proprietorship, see Rule 265 of these rules. If the
business is an S corporation or partnership, see Rule 263 of these rules.
(4-6-23)
03.
Payment of Penalties. Payment of penalties is sourced to Idaho the same as interest income. This
includes penalties arising from the prepayment or late payment of an installment contract. If the installment contract
is for the sale of Idaho property, any penalty paid is Idaho source income.
(4-6-23)
04.
Covenant Not to Compete. Income from a covenant not to compete is sourced to Idaho based on
the Idaho apportionment factor of the entity sold for the taxable year immediately preceding the year of the sale.
(4-6-23)
05.
Goodwill. Gain or loss from the sale of goodwill from a business transacting business in Idaho is
sourced to Idaho based on the Idaho apportionment factor of the business sold for the taxable year immediately
preceding the year of the sale.
(4-6-23)
06.
Timing of Sourcing Determination for Intangible Personal Property. The source of gains and
losses from the sale or other disposition of intangible personal property is determined at the time of the sale or
disposition of the property. For example, if an Idaho resident sells intangible personal property under the installment
method, and subsequently becomes a nonresident, gain attributable to any installment payment receipts relating to
that sale will be sourced to Idaho even though the individual is a nonresident when a payment is received. If the
intangible personal property was employed in the owner's business, trade, profession, or occupation conducted or
carried on in Idaho as described in Paragraph 266.01.a., of this rule, at the time of the sale, any subsequent installment
payments is Idaho source income.
(4-6-23)