N.Y. Comp. Codes R. & Regs. tit. 20, § 132.8 – Undistributed taxable income, net operating loss and gain or loss on sale or exchange of stock with respect to an electing small business corporation.

(a) undistributed taxable income of such corporation does not constitute income or gain derived from New York State sources;
(b) a net operating loss of such corporation does not constitute a loss or deduction derived from or connected with New York State sources; and
(c) any gain or loss realized or incurred on the sale or exchange by such dividual of stock of a small business corporation does not constitute a gain or loss derived from or connected with New York State sources. This includes a loss incurred by such individual which is treated as an ordinary loss under section 1244 of the Internal Revenue Code.

Tax Law, § 632(b)(2)-(4)

For a nonresident individual who is a shareholder of a corporation which is an electing small business corporation for Federal income tax purposes: