Client Alert

Indiana Tax Court Allows Deductions for Interest Paid on Intercompany Loans and Holds That Gain from Sale of Partnership Was Nonbusiness Income

12 Jul 2017

On July 11, 2017, the Indiana Tax Court released a decision in E.I. DuPont de Nemours and Company v. Indiana Department of State Revenue. The Tax Court held that the Indiana Department of Revenue had improperly reclassified DuPont’s gain from the 2001 sale of a partnership interest from nonbusiness income to business income. The Tax Court agreed with DuPont that the sale of the partnership interest failed to meet any of Indiana’s statutory tests for business income, and that the gain from the sale was not apportionable business income under the U.S. Constitution because DuPont and the partnership were not engaged in a unitary business.

The Tax Court also held that the Department erred in disallowing interest expense deductions claimed by DuPont for interest paid on intercompany loans, finding that the loans were made at arm’s length rates and rejecting the Department’s arguments that the loans lacked economic substance.

Morrison & Foerster LLP was lead counsel in this case. Please contact Hollis L. Hyans with any questions regarding this decision.

Read a copy of the decision.



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