Section 8. Citations

Unless otherwise noted, all citations to statute in Title 3, Chapter 5 NMAC are to the New Mexico Statutes Annotated, 1978 (NMSA 1978). [1/15/97; 3.5.1.8 NMAC - Rn, 3 NMAC 5.1.8, 6/29/01] 3.5.1.9 “BUSINESS AND NONBUSINESS INCOME” DEFINED: A. Section 7-4-2 NMSA 1978 defines “business income” as income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management or disposition of the property constitute integral parts of the taxpayer's regular trade or business operations. In essence, all income which arises from the conduct or the disposition or liquidation of trade or business operations of a taxpayer is business income. B. “Nonbusiness income” means all income other than business income. C. The classification of income by the labels occasionally used, such as manufacturing income, compensation for services, sales income, interest, dividends, rents, royalties, gains, operating income, nonoperating income, etc., is of no aid in determining whether income is business or nonbusiness income. Income of any type or class and from any source is business income if it arises from transactions and activity occurring in the regular course of a trade or business. Accordingly, the critical element in determining whether income is “business income” or “nonbusiness income” is the identification of the transactions and activity which are the elements of particular trade or business. In general, all transactions and activities of the taxpayer which are dependent upon or contribute to the operations of the taxpayer's economic enterprise as a whole constitute the taxpayer's trade or business and will be transactions and activity arising in the regular course of, and constitute integral parts of, a trade or business. [1/15/74, 9/15/88, 9/20/93, 1/15/97, 10/29/99; 3.5.1.9 NMAC - Rn & A, 3 NMAC 5.1.9, 6/29/01] 3.5.1.10 BUSINESS AND NONBUSINESS INCOME; APPLICATION OF DEFINITIONS: A the operations of the taxpayer's economic enterprise as a whole constitute the taxpayer's trade or business and will be transactions and activity arising in the regular course of, and constitute integral parts of, a trade or business. [1/15/74, 9/15/88, 9/20/93, 1/15/97, 10/29/99; 3.5.1.9 NMAC - Rn & A, 3 NMAC 5.1.9, 6/29/01] 3.5.1.10 BUSINESS AND NONBUSINESS INCOME; APPLICATION OF DEFINITIONS: A. The following are rules for determining whether particular income is business or nonbusiness income. 3.5.1 NMAC 2 B. Rental income from real and tangible property is business income if the property with respect to which the rental income was received is used in the taxpayer's trade or business or is incidental thereto and therefore is includable in the property factor under Part 3.5.11 NMAC. C. Gain or loss from the sale, exchange or other disposition of real or tangible or intangible personal property constitutes business income if the property while owned by the taxpayer was used in the taxpayer's trade or business. However, if such property was utilized for the production of nonbusiness income or otherwise was removed from the property factor before its sale, exchange or other disposition, the gain or loss will constitute nonbusiness income. D. “Interest income” is business income where the intangible with respect to which the interest was received arises out of or was created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the intangible is related to or incidental to such trade or business operations. E. Dividends are business income where the stock with respect to which the dividends are received arises out of or was acquired in the regular course of the taxpayer's trade or business operations or where the purpose of acquiring and holding the stock is related to or incidental to such trade or business operations. F he intangible is related to or incidental to such trade or business operations. E. Dividends are business income where the stock with respect to which the dividends are received arises out of or was acquired in the regular course of the taxpayer's trade or business operations or where the purpose of acquiring and holding the stock is related to or incidental to such trade or business operations. F. Patent and copyright royalties are business income where the patent or copyright with respect to which the royalties were received arises out of or was created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the patent or copyright is related or incidental to such trade or business operations.