1. (a) In computing entire net income, Federal taxable income must be adjusted by subtracting from it:

   1. (1) any refund or credit of a tax imposed under article 32 of the Tax Law for which tax no exclusion or deduction was allowed in determining the taxpayer's entire net income under article 32 of the Tax Law for any prior year;
   2. (2) any amount treated as a dividend pursuant to section 78 of the Internal Revenue Code;
   3. (3) any amount of income or gain includible in determining Federal taxable income for the taxable year, determined pursuant to the instalment method under section 453 of the Internal Revenue Code, resulting from the sale of real or personal property to the extent that the income or gain was included in the computation of net income under article 9-B or 9-C of the Tax Law; and
   4. (4) any other amount of income or gain which was properly included in the computation of net income under article 9-B or 9-C of the Tax Law.

2. (b) In computing entire net income, a deduction shall be allowed, to the extent not deductible in determining Federal taxable income, for the following:

   1. (1) interest on indebtedness incurred or continued to purchase or carry obligations or securities the income of which is subject to tax under article 32 of the Tax Law but exempt for Federal income tax purposes;
   2. (2) ordinary and necessary expenses paid or incurred during the taxable year attributable to income which is subject to tax under article 32 of the Tax Law but exempt for Federal income tax purposes;
   3. (3) the amortized portion of a bond premium for the taxable year on any bond the interest on which is subject to tax under article 32 of the Tax Law but exempt for Federal income tax purposes;
   4. (4) that portion of wages and salaries paid or incurred for the taxable year for which a deduction is not allowed pursuant to the provisions of section 280C of the Internal Revenue Code;
   5. (5) any amount which is included in the taxpayer's Federal taxable income solely as a result of an election made pursuant to section 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in such section;
   6. (6) any amount which the taxpayer could have excluded from Federal taxable income had it not made the election provided for in section 168(f)(8) of the Internal Revenue Code as it was in effect for safe harbor lease agreements entered into prior to January 1, 1984, except with respect to property which is a qualified mass commuting vehicle described in such section;

   7. (7) with respect to recovery property for which the accelerated cost recovery system deduction is allowed pursuant to section 168 of the Internal Revenue Code, the amount allowable as the depreciation deduction pursuant to section 167 of the Internal Revenue Code as such section would have applied to property placed in service on December 31, 1980, except recovery property:

      1. (i) subject to section 280F of the Internal Revenue Code (regarding luxury automobiles and certain property used for personal purposes);
      2. (ii) placed in service in New York State in taxable years beginning after December 31, 1984; or
      3. (iii) to which the adjustment required by paragraph (a)(7) of section 18-2.3 of this Subpart applies;
   8. (8) upon the disposition of recovery property to which paragraph (7) of this subdivision applies, the amount, if any, by which the aggregate accelerated cost recovery system deduction attributable to such property, described in paragraph (a)(9) of section 18-2.3 of this Subpart exceeds the aggregate of the deductions for depreciation attributable to such property deducted in computing entire net income pursuant to paragraph (7) of this subdivision;
   9. (9) any amount of money or other property received from the Federal Deposit Insurance Corporation pursuant to section 13(c) of the Federal Deposit Insurance Act, as amended (12 USC 1823[c]), regardless of whether any note or other instrument is issued in exchange therefor;

   10. (10) any amount of money or other property received from the Federal Savings and Loan Insurance Corporation pursuant to section 406(f)(1), (2), (3) or (4) of the Federal National Housing Act, as amended (12 USC 1729[f][1], [2], [3] or [4]), regardless of whether any note or other instrument is issued in exchange therefor;

       1. (i) 17 percent of interest income from subsidiary capital; and
       2. (ii) 60 percent of dividend income, gains and losses from subsidiary capital to the extent not already deducted pursuant to paragraph (a)(2) of this section; and

       (11)

   11. (12) 22½ percent of interest income on obligations of New York State, or of any political subdivision thereof, or of the United States, other than obligations held for resale in connection with regular trading activities. The term obligation refers to obligations incurred in the exercise of the borrowing power of New York State or any of its political subdivisions or of the United States. This term does not refer to a guarantee of the debt of a third party. The following are examples of instruments that are not obligations incurred in the exercise of the borrowing power of New York State or any of its political subdivisions or of the United States:

       1. (i) guaranteed student loans;
       2. (ii) industrial development bonds issued pursuant to article 18-A of the New York State General Municipal Law;
       3. (iii) Federal National Mortgage Association mortgage-backed securities; and

       4. (iv) Government National Mortgage Association mortgage-backed securities.

          The Tax Commission will publish on a regular basis a list of obligations which meet the requirements of this paragraph.

3. (c) In the case of the sale or exchange of depreciable property which was subject to articles 9-B and 9-C of the Tax Law and has a higher adjusted basis for New York State tax purposes than for Federal income tax purposes, a deduction is allowed in computing entire net income for the portion of the gain or loss which equals the difference in the basis, except as provided in paragraphs (1)-(3) of this subdivision:

   1. (1) for property of a taxpayer, other than a savings bank or a savings and loan association, acquired prior to January 1, 1926 and disposed of thereafter, no gain will be deemed to have been derived if either the cost of fair market price or value on January 1, 1926 exceeds the value realized, nor a loss sustained if either the cost of fair market price or value on January 1, 1926 is less than the value realized;
   2. (2) for property of a savings and loan association acquired prior to January 1, 1953 and disposed of thereafter, no gain will be deemed to have been derived if either the cost or fair market price or value on January 1, 1953 exceeds the value realized, nor a loss sustained if either the cost or fair market price or value on January 1, 1953 is less than the value realized;

   3. (3) for the purpose of ascertaining a gain or loss from the sale, exchange or other disposition of:

      1. (i) property of a taxpayer, other than a savings bank or a savings and loan association, acquired prior to January 1, 1926 and disposed of thereafter, the basis for computing a gain when both the cost and the fair market price or value on January 1, 1926 are less than the value realized, is the cost or fair market price or value on that date, whichever is higher, and the basis for computing a loss when both the cost and the fair market price or value on January 1, 1926 exceeds the value realized, is the cost or fair market price or value on that date, whichever is lower;
      2. (ii) property of a savings bank acquired prior to January 1, 1994 and disposed of thereafter, the basis is the value as of December 31, 1943, as set forth in such bank's report of surplus and undivided earnings filed with the Tax Commission as of that date;
      3. (iii) property of a savings and loan association acquired prior to January 1, 1953 and disposed of thereafter, the basis for computing a gain, when both the cost and the fair market price or value on January 1, 1953 are less than the value realized, is the cost or fair market price or value on that date, whichever is higher, and the basis for computing a loss, when both the cost and fair market price or value on January 1, 1953 exceeds the value realized, is the cost or fair market price or value on that date, whichever is lower.
4. (d) The term cost, for purposes of subdivision (c) of this section, means the purchase price less the depreciation properly chargeable against the property since the date of acquisition, plus the cost of any permanent improvements made to the property subsequent to acquisition, less the depreciation thereon from the date such permanent improvements were completed. In the case of bonds, the purchase price shall be reduced by the total amount of amortizable bond premium allowable under subdivision 9 of section 219-z or subdivision 9 of section 219-xx of the Tax Law. In the case of property acquired by exchange, the fair market value of the property at the date acquired shall be considered as being the purchase price of such property, except in those cases where these regulations provide that the property received in exchange shall be considered as substituted for and have the same value as the property exchanged. In the case of property which is included in an inventory, the “cost” of such property shall be the last inventory value thereof made in accordance with the method of accounting on which the taxpayer's books are kept.

5. (e) Definition of fair market price or value for purposes of subdivision (c) of this section:

   1. (1) The term fair market price or value on January 1, 1926 means the exchange value of the property on that date. Where there has been a change in the market value of the property since acquisition, but the actual market value of the property on January 1, 1926 is not proved conclusively, the difference between its selling price and its cost, as herein defined, disregarding the cost of permanent improvements made since December 31, 1926 and the depreciation thereon, will be deemed to have arisen ratably over the period during which the property was held and the January 1, 1926 value will be determined accordingly. In the case of securities dealt in on a recognized exchange, the fair market value on January 1, 1926 will ordinarily be determined by the average of the bid and asked prices after closing on December 31, 1925. In all other cases, other evidence of value is necessary and bona fide sales nearest January 1, 1926, of securities publicly or privately dealt in, will be considered.
   2. (2) In the case of property acquired by a savings bank prior to January 1, 1944, the basis shall be the value as of December 31, 1943, as set forth in such bank's report of surplus and undivided earnings filed with the Tax Commission as of that date, less the depreciation properly chargeable against the property since December 31, 1943, plus the cost of any permanent improvements made to the property since December 31, 1943, less depreciation thereon from the date such improvements were completed. In the case of bonds acquired prior to January 1, 1944, the value as of December 31, 1943 as set forth in the bank's report of surplus and undivided earnings filed with the Tax Commission as of December 31, 1943, shall be reduced by the total amount of amortizable bond premium allowable under subdivision 9 of section 219-z of the Tax Law.
   3. (3) The term fair market price or value on January 1, 1953 means the exchange value of the property on that date. Where there has been a change in the market value of the property since acquisition, but the actual market value of the property on January 1, 1953 is not proved conclusively, the difference between its selling price and its cost, as herein defined, disregarding the cost of permanent improvements made since December 31, 1953, and the depreciation thereon, will be deemed to have risen ratably over the period during which the property was held, and the January 1, 1953 value will be determined accordingly.

Tax Law, § 1453