1. (1) In the case of a taxpayer that computes its tax with respect to its interest in a partnership using the aggregate method as described in section 3-13.3 of this Title, the taxpayer takes into account its distributive share of the partnership's receipts and payroll within and without New York State and its distributive share or proportionate part, as the case may be, (see section 3-13.3[a][1], [2] and [3] of this Title) of the partnership's property within and without New York State in computing its business allocation percentage and alternative business allocation percentage and must include its proportionate part of the assets and liabilities of the partnership which are used in the computation of investment capital in computing its investment allocation percentage.

2. (2) A taxpayer that is a partner of a partnership and is using the aggregate method pursuant to section 3-13.3 of this Title computes its business allocation percentage and alternative business allocation percentage by computing the property, receipts and payroll factors as follows:

   1. (i) the average value of the taxpayer's real and tangible personal property, owned or rented, within New York State plus the average value of the taxpayer's distributive share or proportionate part, as the case may be, (see section 3-13.3[a][1], [2] and [3] of this Title) of the partnership's real and tangible personal property, owned or rented, within New York State during the applicable partnership year is divided by the average value of all of the taxpayer's real and tangible personal property, owned or rented, within and without New York State plus the average value of its distributive share or proportionate part, as the case may be, of the partnership's real and tangible personal property, owned or rented, within and without New York State during the applicable partnership year. Where a taxpayer has leased or rented real or tangible personal property to a partnership in which it is a partner, the taxpayer includes "only" the average value of such property in its property factor. The taxpayer does not include eight times its distributive share of the partnership's rental expense because the average value of the property is included by the corporate partner as the owner of the property. Where a taxpayer has leased or rented real or tangible personal property from a partnership in which it is a partner, the taxpayer includes "both" its proportionate part of the average value of such property and eight times the amount of rental expense that is deemed to have been paid to the other partners with respect to such property. The amount of rental expense deemed paid to other partners is the taxpayer's total rental expense paid to the partnership less the taxpayer's distributive share of the partnership's rental income from such property (see Subpart 4-3 of this Part - Property Factor of Business Allocation Percentage);
   2. (ii) the taxpayer's business receipts within New York State plus the taxpayer's distributive share of the partnership's business receipts within New York State during the applicable partnership year is divided by the taxpayer's total business receipts within and without New York State plus the taxpayer's distributive share of the partnership's business receipts within and without New York State during the applicable partnership year. Where a taxpayer has receipts from sales to a partnership in which it is a partner, the taxpayer must reduce its gross receipts from its sales to the partnership by its distributive share of such purchases by the partnership. Where a partnership has receipts from sales to a taxpayer that is a partner in the partnership, the taxpayer does not include its distributive share of the partnership receipts from sales to the taxpayer in its receipts factor (see Subpart 4-4 of this Part—Receipts Factor of Business Allocation Percentage);
   3. (iii) the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within New York State plus the taxpayer's distributive share of the wages, salaries and other personal service compensation paid by the partnership to its employees, except employees of the partnership having partnership-wide authority or having responsibility for an entire division of the partnership, within New York State during the applicable partnership year is divided by the wages, salaries and other personal service compensation of the taxpayer's employees, except general executive officers, within and without New York State plus the taxpayer's distributive share of the wages, salaries and other personal service compensation paid by the partnership to its employees, except employees of the partnership having partnership-wide authority or having responsibility for an entire division of the partnership, within and without New York State during the applicable partnership year (see Subpart 4-5 of this Part—Payroll Factor of Business Allocation Percentage).

3. (3) The following examples illustrate the inter-entity eliminations and exclusions discussed in subparagraphs (2)(i) and (ii) of this subdivision: Example 1: Example 2: Example 3: Example 4: Example 5:

   Example 1:

   Partnership rents a building owned by a corporate partner

   Partnership P has two partners, corporation A and corporation B. A has a 20 percent interest in the partnership and B has an 80 percent interest. There are no allocations of an item, amount or activity. A owns a building (average value of $100,000) that is rented to P for $12,000 per year. A must include the average value of $100,000 for the building in its property factor. No portion of the property's rental value is included in A's property factor.

   Example 2:

   Corporate partner rents a building owned by the partnership Assume the same facts as in example 1, except P owns the building and rents it to A for $12,000 per year. A must include $20,000 (20 percent × $100,000) its proportionate part (see section 3-13.3[a][2] of this Title) of the average value of the building in its property factor and A must take into account $9,600 ($12,000 less 20 percent thereof) of rental expense into its property factor. Thus, the value of the building to be used in A's property factor is $96,800 ($20,000 + [8 × $9,600)].

   Example 3:

   Corporate partner sells goods to a partnership

   Partnership P has two partners, corporation A and corporation B. A has a 20 percent interest in the partnership and B has an 80 percent interest. There are no allocations of an item, amount or activity. A's sales are $20,000,000 for the year, $5,000,000 of which are made to P. P makes sales of $10,000,000 during the same year, none of which are to A or other partners. The denominator of A's receipts factor is $21,000,000, determined as follows:

   Sales by A		$20,000,000
   Add: A's distributive share (20%) of P's total sales	$2,000,000
   Less: A's distributive share of P's purchases from A (20% × $5M)	$1,000,000
   Denominator of A's sales factor		$21,000,000

   Example 4:

   Partnership sells goods to a corporate partner

   Assume the same facts as in example 3. The sales made by A, B, and P are as follows:

   A		$20,000,000
   B		$60,000,000
   P:
   To A	$1,000,000
   To B	9,000,000	$10,000,000
   The denominator of A's receipts factor is $21,800,000, determined as follows:
   Sales by A		$20,000,000
   Add: A's distributive share (20%) of P's total sales	$2,000,000
   Less: A's distributive share of P's sales to A (20% × $1M)	(200,000)	1,800,000
   Denominator of A's receipts factor		$21,800,000
   The denominator of B's receipts factor is $60,800,000, determined as follows:
   Sales by B		$60,000,000
   Add: B's distributive share (80%) of P's total sales	$8,000,000
   Less: B's distributive share of P's sales to B (80% × $9M)	(7,200,000)	800,000
   Denominator of B's receipts factor		$60,800,000

   Example 5:

   Partner sells to corporate partners and unrelated parties

   Assume the same facts as in example 3. The sales made by A, B, and P are as follows:

   A		$20,000,000
   B		$80,000,000
   P:
   To A	$3,000,000
   To B	6,000,000
   To X	1,000,000	$10,000,000
   The denominator of A's receipts factor is $21,400,000, determined as follows:
   Sales by A		$20,000,000
   Add: A's distributive share (20%) of P's total sales	2,000,000
   Less: A's distributive share of P's sales to A (20% × $3M)	(600,000)	1,400,000
   Denominator of A's receipts factor		$21,400,000
   The denominator of B's receipts factor is $83,200,000, determined as follows:
   Sales by B		$80,000,000
   Add: B's distributive share (80%) of P's total sales	$8,000,000
   Less: B's distributive share of P's sales to B (80% × $6M)	(4,800,000)	3,200,000
   Denominator of B's receipts factor		$83,200,000

4. (4) A taxpayer which is a partner of a partnership computes its business allocation percentage pursuant to section 4-2.2(b) of this Part and its alternative business allocation percentage pursuant to section 210(3-a) of the Tax Law by using, as the real and tangible personal property factor, the business receipts factor and the payroll factor, the factors described in paragraph (2) of this subdivision.

5. (5) A taxpayer which is principally engaged in the conduct of aviation or in the conduct of a railroad or trucking business pursuant to section 4-2.2(b)(2) of this Part computes its business allocation percentage using the factors described in section 210.3(a)(7)(A) and (8) of the Tax Law, respectively. If such a taxpayer is a partner in a partnership, it allocates its business income, business capital and alternative business income as follows:

   1. (i) a taxpayer principally engaged in the conduct of aviation computes its business allocation percentage by including its distributive share or proportionate part, as the case may be, (see section 3-13.3[a][1], [2] and [3] of this Title) of partnership amounts described in section 210.3(a)(7)(A) of the Tax Law, during the applicable partnership year;
   2. (ii) a taxpayer principally engaged in the conduct of a railroad or trucking business computes its business allocation percentage by including its proportionate part (see section 3-13.3[a][2] of this Title) of partnership amounts described in section 210.3(a)(8) of the Tax Law, during the applicable partnership year.

6. (6) Except as provided in subdivisions (b) and (c) of this section, every taxpayer that is a partner of a partnership computes its investment allocation percentage (see section 4-7.2 of this Part—Computation of investment allocation percentage) as follows:

   1. (i) ascertain the average net value of each stock, bond or other security, other than governmental securities, included in the taxpayer's investment capital plus its proportionate part of the average net value of each stock, bond or other security, other than governmental securities, included in the assets and liabilities of the partnership which are used in the computation of investment capital during the applicable partnership year (see section 4-7.2[a][1] of this Part);
   2. (ii) multiply the net value of each stock, bond or other security by its issuer's allocation percentage (see section 4-7.2[b] of this Part);
   3. (iii) add all the products determined in subparagraph (ii) of this paragraph;
   4. (iv) divide the sum obtained in subparagraph (iii) of this paragraph by the net value of the taxpayer's total investment capital plus its proportionate part of the total assets and liabilities of the partnership which are used in the computation of investment capital during the applicable partnership year, exclusive of cash, even if such cash is treated as investment capital pursuant to section 3-3.2(a)(1) of this Title (see section 4-7.2 of this Part—Computation of investment allocation percentage).

7. (b) A taxpayer that is a partner in a partnership and is using the entity method pursuant to the provisions of section 3-13.4 of this Title shall allocate its distributive share of partnership items of income, gain, loss and deduction included in its business income and alternative business income as described in section 3-13.4(b)(1) of this Title and its interest in the partnership included in its business capital as described in section 3-13.4(c)(1) of this Title, by:

   1. (1) its business allocation percentage determined under section 4-2.2 of this Title, computed without regard to either its distributive share of any partnership items of income, gain, loss or deduction or its proportionate part of the partnership's assets, liabilities, and activities; or

   2. (2) if the taxpayer can establish to the satisfaction of the commissioner, or the commissioner finds, that the use of the percentage provided in paragraph (1) of this subdivision does not properly reflect the activity, business income, alternative business income or business capital in New York State, the taxpayer shall use any other method which the commissioner has determined results in a proper reflection of the taxpayer's activity, business income, alternative business income or business capital in New York State. (See sections 4-6.1 and 4-6.2 of this Subpart and section 210.8 of the Tax Law for information relating to the power of the commissioner to adjust the business allocation and alternative business allocation percentage).

      (c)

   3. (1) Except for a taxpayer described in section 3-13.5(a)(2) of this Title, a taxpayer which elects to compute its tax bases by taking into account only its distributive share of each partnership item of receipts, income, gain, loss and deduction and the taxpayer's proportionate part each partnership asset and liability, and each partnership activity (see section 3-13.3[a][1], [2] and [3] of this Title) pursuant to the provisions of section 3-13.5 of this Title shall allocate its distributive share (including any modifications thereto) of such items which are used in the computation of business income and investment income, and its proportionate part of such items of assets and liabilities of the partnership which are used in the computation of business capital and investment capital, of each such partnership by computing a separate business allocation percentage, a separate alternative business allocation percentage and a separate investment allocation percentage with respect to each partnership for which it makes the election set forth in such section 3-13.5 of this Title.

   4. (2) The property, receipts and payroll factors of the business allocation percentage and alternative business allocation percentage, both referred to in paragraph (1) of this subdivision, are computed as follows:

      1. (i) the average value of the taxpayer's distributive share or proportionate part, as the case may be, (see section 3-13.3[a][1], [2] and [3] of this Title) of the partnership's real and tangible personal property, owned or rented within New York State during the applicable partnership year divided by the average value of its distributive share or proportionate part, as the case may be, of the partnership's real and tangible personal property, owned or rented, within and without New York State during such period (see Subpart 4-3 of this Part—Property Factor of Business Allocation Percentage);
      2. (ii) the taxpayer's distributive share of the partnership's business receipts within New York State during the applicable partnership year divided by the taxpayer's distributive share of the partnership's business receipts within and without New York State during such period (see Subpart 4-4 of this Part—Receipts Factor of Business Allocation Percentage);
      3. (iii) the taxpayer's distributive share of the wages, salaries and other personal service compensation paid by the partnership to its employees, except employees of the partnership having partnership-wide authority or having responsibility for an entire division of the partnership, within New York State during the applicable partnership year divided by the taxpayer's distributive share of the wages, salaries and other personal service compensation paid by the partnership to its employees, except employees of the partnership having partnership-wide authority or having responsibility for an entire division of the partnership, within and without New York State during such period (see Subpart 4-5 of this Part—Payroll Factor of Business Allocation Percentage).
   5. (3) A taxpayer subject to the provisions of this subdivision computes its business allocation percentage pursuant to section 4-2.2(b) of this Part and its alternative business allocation percentage pursuant to section 210(3-a) of the Tax Law by using, as the real and tangible personal property factor, the business receipts factor and payroll factor, the factors described in paragraph (2) of this subdivision.

   6. (4) A taxpayer subject to the provisions of this subdivision which is principally engaged in the conduct of aviation or in the conduct of a railroad or trucking business pursuant to section 4-2.2(b) of this Part, allocates its business income, business capital and alternative business income as follows:

      1. (i) a taxpayer principally engaged in the conduct of aviation computes its business allocation percentage by taking into account only its distributive share or proportionate part, as the case may be, (see section 3-13.3[a][1], [2] and [3] of this Title) of partnership amounts described in section 210.3(a)(7)(A) of the Tax Law during such period;
      2. (ii) a taxpayer principally engaged in the conduct of a railroad or a trucking business computes its business allocation percentage by taking into account only its proportionate part (see section 3-13.3[a][2] of this Title) of partnership amounts described in section 210.3(a)(8) of the Tax Law during such period.

   7. (5) A taxpayer subject to the provisions of this subdivision computes its investment allocation percentage (see section 4-7.2 of this Part—Computation of investment allocation percentage) as follows:

      1. (i) ascertain the average net value of its proportionate part of each stock, bond or other security, other than governmental securities, included in the assets and liabilities of the partnership which are used in the computation of investment capital during the applicable partnership year (see section 4-7.2[a][1] of this Part);
      2. (ii) multiply the net value of each stock, bond or other security by its issuer's allocation percentage (see section 4-7.2[b] of this Part);
      3. (iii) add all the products determined in subparagraph (ii) of this paragraph;
      4. (iv) divide the sum obtained in subparagraph (iii) of this paragraph by the net value of the taxpayer's proportionate part of the total assets and liabilities of the partnership which are used in the computation of investment capital during the applicable partnership year, exclusive of cash, even if such cash is treated as investment capital pursuant to section 3-3.2(a)(1) of this Title (see section 4-7.2 of this Part—Computation of investment allocation percentage).

8. (d) Every taxpayer which is a partner of a partnership must submit:

   1. (1) a copy of pages 1 and 4 of the Federal Partnership Return of Income; and
   2. (2) a schedule showing how income and losses are distributed among the partners.
9. (e) The term applicable partnership year means any taxable year of the partnership ending within or with the taxable year of the partner.

(a)