N.Y. Tax Law § 617 — Resident partners and shareholders of S corporations

§ 617. Resident partners and shareholders of S corporations. (a)\nPartner's and shareholder's modifications. In determining New York\nadjusted gross income and New York taxable income of a resident partner\nor a resident shareholder of an S corporation (other than an S\ncorporation which is a New York C corporation), any modification\ndescribed in subsections (b), (c) or (d) of section six hundred twelve,\nsubsection (c) of section six hundred fifteen or paragraphs (2) or (3)\nof subsection (d) of such section, which relates to an item of\npartnership or S corporation income, gain, loss or deduction shall be\nmade in accordance with the partner's distributive share or the\nshareholder's pro rata share, for federal income tax purposes, of the\nitem to which the modification relates. Where a partner's distributive\nshare or a shareholder's pro rata share of any such item is not required\nto be taken into account separately for federal income tax purposes, the\npartner's or shareholder's share of such item shall be determined in\naccordance with his share, for federal income tax purposes, of\npartnership or S corporation taxable income or loss generally. In the\ncase of a New York S termination year, his pro rata share of any such\nitem shall be determined under subsection (s) of section six hundred\ntwelve.\n (b) Character of items. Each item of partnership and S corporation\nincome, gain, loss, or deduction shall have the same character for a\npartner or shareholder under this article as for federal income tax\npurposes. Where an item is not characterized for federal income tax\npurposes, it shall have the same character for a partner or shareholder\nas if realized directly from the source from which realized by the\npartnership or S corporation or incurred in the same manner as incurred\nby the partnership or S corporation.\n (c) New York tax avoidance or evasion. Where a partner's distributive\nshare of an item of partnership income, gain, loss or deduction is\ndetermined for federal income tax purposes by special provision in the\npartnership agreement with respect to such item, and where the principal\npurpose of such provision is the avoidance or evasion of tax under this\narticle, the partner's distributive share of such item, and any\nmodification required with respect thereto, shall be determined as if\nthe partnership agreement made no special provision with respect to such\nitem.\n