NYC ALJ UPHOLDS TAX ON CAPITAL GAIN BASED ON NYC PRESENCE OF INVESTMENT THAT WAS SOLD -

A New York City Administrative Law Judge has upheld the Department of Finance’s imposition of General Corporation Tax (“GCT”) on a gain realized by a corporate taxpayer from the sale of its interest in an LLC doing business in NYC, although the corporation did not have a unitary business relationship with the LLC. Matter of Goldman Sachs Petershill Fund Offshore Holdings (Delaware) Corp., TAT (H) 16-9 (GC) (N.Y.C. Tax App. Trib., Admin. Law Judge Div., Dec. 6, 2018).

Facts. The petitioner, Goldman Sachs Petershill Fund Offshore Holdings (Delaware) Corp. (“GS Offshore”), owned an 88.91% interest in an investment vehicle, the Petershill U.S. IM Master Fund LP (“Master Fund”), which had been formed to make investments in alternative investment management companies. The Master Fund was managed by a London-based investment team employed by another Goldman Sachs–related entity. In 2008, the Master Fund purchased a 9.99% interest in Claren Road Asset Management, LLC (“Claren”), which operated as an investment management company. The London-based investment team managed Master Fund’s investment in Claren solely in London. Claren engaged in business in New York in 2008, 2009, and 2010.