N.Y. Laws » CHAPTER Tax / ARTICLE Personal Income Tax / PART Nonresidents and Part-year Residents
New York Consolidated Laws

N.Y. Tax Law § 632 (2026)

Nonresident partners and electing shareholders of S corporations

✓ current as of May 2026
Find cases: SyfertCases citing this section NY-LEGnysenate.gov Justiaon Justia CornellLII Search CasesGoogle Scholar 
§ 632. Nonresident partners and electing shareholders of S
corporations.  (a) Portion derived from New York sources.
  (1) In determining New York source income of a nonresident partner of
any partnership, there shall be included only the portion derived from
or connected with New York sources of such partner's distributive share
of items of partnership income, gain, loss and deduction entering into
his federal adjusted gross income, as such portion shall be determined
under regulations of the tax commission consistent with the applicable
rules of section six hundred thirty-one of this part. If a nonresident
is a partner in a partnership where a sale or transfer of the membership
interest of the partner is subject to the provisions of section
one-thousand sixty of the internal revenue code, then any gain
recognized on the sale or transfer for federal income tax purposes shall
be treated as New York source income allocated in a manner consistent
with the applicable methods and rules for allocation under this article
in the year that the assets were sold or transferred.
  (2) In determining New York source income of a nonresident shareholder
of an S corporation where the election provided for in subsection (a) of
section six hundred sixty of this article is in effect, there shall be
included only the portion derived from or connected with New York
sources of such shareholder's pro rata share of items of S corporation
income, loss and deduction entering into his federal adjusted gross
income, increased by reductions for taxes described in paragraphs two
and three of subsection (f) of section thirteen hundred sixty-six of the
internal revenue code, as such portion shall be determined under
regulations of the commissioner consistent with the applicable methods
and rules for allocation under article nine-A of this chapter,
regardless of whether or not such item or reduction is included in
entire net income under article nine-A for the tax year. If a
nonresident is a shareholder in an S corporation where the election
provided for in subsection (a) of section six hundred sixty of this
article is in effect, and the S corporation has distributed an
installment obligation under section 453(h)(1)(A) of the Internal
Revenue Code, then any gain recognized on the receipt of payments from
the installment obligation for federal income tax purposes will be
treated as New York source income allocated in a manner consistent with
the applicable methods and rules for allocation under article nine-A of
this chapter in the year that the assets were sold. In addition, if the
shareholders of the S corporation have made an election under section
338(h)(10) of the Internal Revenue Code, then any gain recognized on the
deemed asset sale for federal income tax purposes will be treated as New
York source income allocated in a manner consistent with the applicable
methods and rules for allocation under article nine-A of this chapter in
the year that the shareholder made the section 338(h)(10) election. For
purposes of a section 338(h)(10) election, when a nonresident
shareholder exchanges his or her S corporation stock as part of the
deemed liquidation, any gain or loss recognized shall be treated as the
disposition of an intangible asset and will not increase or offset any
gain recognized on the deemed assets sale as a result of the section
338(h)(10) election.
  (b) Special rules as to New York sources. In determining the sources
of a nonresident partner's income, no effect shall be given to a
provision in the partnership agreement which--
  (1) characterizes payments to the partner as being for services or for
the use of capital, or
  (2) allocates to the partner, as income or gain from sources outside
New York, a greater proportion of his distributive share of partnership
income or gain than the ratio of partnership income or gain from sources
outside New York to partnership income or gain from all sources, except
as authorized in subsection (d), or
  (3) allocates to the partner a greater proportion of a partnership
item of loss or deduction connected with New York sources than his
proportionate share, for federal income tax purposes, of partnership
loss or deduction generally, except as authorized in subsection (d).
  (c) Partner's and shareholder's modifications. Any modification
described in subsection (b) or (c) of section six hundred twelve, which
relates to an item of partnership or S corporation income, gain, loss or
deduction, shall be made in accordance with the partner's distributive
share or the shareholder's pro rata share for federal income tax
purposes of the item to which the modification relates, but limited to
the portion of such item derived from or connected with New York
sources.
  (d) Alternate methods. The tax commission may, on application,
authorize the use of such other methods of determining a nonresident
partner's portion of partnership items derived from or connected with
New York sources, and the modifications related thereto, as may be
appropriate and equitable, on such terms and conditions as it may
require.
  (e) Application of rules for resident partners and shareholders to
nonresident partners and shareholders.
  (1) A nonresident partner's distributive share or S corporation
shareholder's pro rata share of items shall be determined under
subsection (a) of section six hundred seventeen.
  (2) The character of partnership or corporation items for a
nonresident partner or S corporation shareholder shall be determined
under subsection (b) of section six hundred seventeen.
  (3) The effect of a special provision in a partnership agreement
(other than a provision referred to in subsection (b) of this section)
having the principal purpose of avoidance or evasion of tax under this
article shall be determined under subsection (c) of section six hundred
seventeen.
Notes of Decisions
Cited in 21 cases, 1984–2018 · leading case: Caprio v. New York State Dep't of Taxation & Fin., 37 Misc. 3d 964 (N.Y. Sup. Ct. 2012).
Sort: Relevance Newest Treatment
Caprio v. New York State Dep't of Taxation & Fin., 37 Misc. 3d 964 (N.Y. Sup. Ct. 2012). · cites it 13× “) The text of the 2010 amendment as initially proposed by the governor had provided that the amendment to Tax Law § 632 (a) (2) would apply to “all tax years for which the statute of limitations for seeking a refund or assessing additional tax are still open” (L 2010, ch 57,…”
Philip Caprio v. New York State Dep't of Taxation & Fin., 37 N.E.3d 707 (N.Y. 2015). · cites it 9× “On this appeal, we are asked to decide whether the 3 1 /2-year retroactive application of the 2010 amendments to Tax Law § 632 (a) (2) (L 2010, ch 57, § 1, part C) is unconstitutional, as applied to plaintiffs, under the Due Process Clauses of the United States and New York…”
Robert R. Burton v. New York State Dep't of Taxation & Fin., 37 N.E.3d 718 (N.Y. 2015). · cites it 6× “Based on the results of a subsequent audit, defendant New York State Department of Taxation and Finance assessed $167,000 in state income taxes on plaintiffs’ JBS transaction gains, relying on Tax Law § 632 (a) (2), which was amended in 2010 to provide, in relevant part, that…”
Michaelsen v. New York State Tax Comm'n, 496 N.E.2d 674 (N.Y. 1986). · cites it 3× “Tax Law § 632 (a) (1) provides that the New York adjusted gross income of a nonresident individual shall include all income entering into a taxpayer’s Federal adjusted gross income, provided that it is "derived from or connected with New York sources”.”
Huckaby v. New York State Div. of Tax Appeals, 829 N.E.2d 276 (N.Y. 2005). · cites it 2× “[2] In Speno , we addressed the language "sources within the state" (former Tax Law § 632) in relation to the taxation of the income of the nonresident president of a company with offices in New York and abroad.”
Burton v. New York State Dep't of Taxation & Fin., 43 Misc. 3d 316 (N.Y. Sup. Ct. 2014). · cites it 4× “Correspondingly, plaintiffs maintain that defendants’ reliance upon the 2010 amendment to Tax Law § 632 (a) (2), as applied here, was unconstitutional.”
Friedsam v. State Tax Comm'n, 473 N.E.2d 1181 (N.Y. 1984). “The majority of the Commission concluded that “alimony is not a deduction attributable to petitioner’s profession carried on in this state, within the meaning of Tax Law section 632(b)(1)(B)” and, therefore, not a proper adjustment to income in computing petitioner’s New York…”
Weil v. Chu, 120 A.D.2d 781 (N.Y. App. Div. 1986). “Petitioners, as partners in a law firm with its main office in New York, are carrying on a profession in this State (see, Tax Law § 632 [b] [1] [B]). This is not true of employees of the Washington office or of out-of-State attorneys who are not members of a New York law firm.”
Domber v. Tax Appeals Tribunal, 263 A.D.2d 277 (N.Y. App. Div. 2000). “Likewise, only that portion of a nonresident partner’s distributive share of partnership income “derived from or connected with New York sources” was subject to tax (see, Tax Law § 632 [former (a) (1)]). Under the regulations in effect at the time of the assessment, income…”
Caprio v. New York State Dep't of Taxation & Fin., 117 A.D.3d 168 (N.Y. App. Div. 2014). · cites it 8× “As relevant here, in August 2010, the following sentence, drafted by the Tax Department, was added to Tax Law § 632 (a) (2): “If a nonresident is a shareholder in an S corporation .”
Michaelsen v. New York State Tax Comm'n, 107 A.D.2d 389 (N.Y. App. Div. 1985). · cites it 4× “Following a hearing, respondent found that as the stock was acquired through the exercise of a stock option plan connected with petitioner’s employment, the gain from the sale of the stock was income for the purpose of Tax Law § 632 (b). Petitioner then commenced the instant…”
Katz v. State Tax Comm'n, 110 A.D.2d 1029 (N.Y. App. Div. 1985). “Respondent contends that the interest income from the unsecured notes is taxable pursuant to Tax Law § 632 (b), which provides, in relevant part: “(1) Items of income, gain, loss and deduction derived from or connected with New York sources shall be those attributable to: “(A)…”
Show all 21 citing cases →
N.Y. Tax Law § 632(b)(1)(B): 1 case
Friedsam v. State Tax Comm'n, 473 N.E.2d 1181 (N.Y. 1984). “The majority of the Commission concluded that “alimony is not a deduction attributable to petitioner’s profession carried on in this state, within the meaning of Tax Law section 632(b)(1)(B)” and, therefore, not a proper adjustment to income in computing petitioner’s New York…”
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.