New York Laws
Part 2 - Residents
617 - Resident Partners and Shareholders of S Corporations.

(b) Character of items. Each item of partnership and S corporation
income, gain, loss, or deduction shall have the same character for a
partner or shareholder under this article as for federal income tax
purposes. Where an item is not characterized for federal income tax
purposes, it shall have the same character for a partner or shareholder
as if realized directly from the source from which realized by the
partnership or S corporation or incurred in the same manner as incurred
by the partnership or S corporation.
(c) New York tax avoidance or evasion. Where a partner's distributive
share of an item of partnership income, gain, loss or deduction is
determined for federal income tax purposes by special provision in the
partnership agreement with respect to such item, and where the principal
purpose of such provision is the avoidance or evasion of tax under this
article, the partner's distributive share of such item, and any
modification required with respect thereto, shall be determined as if
the partnership agreement made no special provision with respect to such
item.

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