Corrigan v. Testa Decision Could Mean State Tax Opportunity for Investors – March 23, 2017 by Hannah Prengler

A recent taxpayer victory in Ohio could influence all states imposing a personal income tax. In Corrigan v. Testa, the Ohio Supreme Court ruled Ohio cannot tax the capital gain received when a non-resident sells his passive ownership interest in an Ohio limited liability company (LLC). The Court came to this decision after analyzing the structure of the transaction, and Corrigan’s involvement in the LLC and Ohio activities.
 
This decision creates potentially significant planning opportunities for taxpayers residing in a low- or no-tax state, essentially removing the fear of taxation from investing in businesses outside their resident state. To benefit from this opportunity, taxpayers should carefully consider the initial structuring of any investment, as well as their exit strategy.
 
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.