§ 105. Unincorporated business gross income. (a)
General.--Unincorporated business gross income of an unincorporated
business means the sum of the items of income and gain of the business,
of whatever kind and in whatever form paid, includible in gross income
for the taxable year for federal income tax purposes, including income
and gain from any property employed in the business, or from liquidation
of the business, or from collection of installment obligations of the
business, with the modifications specified in this section.

(b) Modifications increasing federal gross income.--There shall be
added to federal gross income of the business the following items
attributable to the business:

(1) Interest income on obligations of any state other than this state,
or of a political subdivision of any such other state unless created by
compact or agreement to which this state is a party; and

(2) Interest or dividend income on obligations or securities of any
authority, commission, or instrumentality of the United States, which
the laws of the United States exempt from federal income tax but not
from state or local income taxes.

(3) In the case of a taxpayer who has exercised the election permitted
by subdivision (b) of section one hundred eight, if the property to
which such election relates was sold or otherwise disposed of during the
taxable year, the amount required by said subdivision to be added to
federal gross income.

(4) The entire amount allowable as an exclusion or deduction for stock
transfer taxes imposed by article twelve of the tax law in determining
federal gross income but only to the extent that such taxes are incurred
and paid in market making transactions.

(5) the amount allowed as an exclusion or deduction for sales and use
taxes imposed by section eleven hundred seven of the tax law in
determining federal gross income but only such portion of such exclusion
or deduction which is not in excess of the amount of the credit allowed
pursuant to subdivision (d) of section one hundred one of this title.

(6) The amount allowed as an exclusion or deduction in determining
federal gross income and also allowed for the taxable year under this
section but only such portion of such exclusion or deduction which is
not in excess of the amount of the credit allowed pursuant to
subdivision (e) of section one hundred one of this title.

(7) The amount allowed as an exclusion or deduction as rent in
determining federal gross income but only such portion of such exclusion
or deduction which is not in excess of the amount of the credit allowed
pursuant to subdivision (f) of section one hundred one of this title.

(8) The amount allowed as an exclusion or deduction for sales and use
taxes imposed by section eleven hundred seven of the tax law in
determining federal gross income but only such portion of such exclusion
or deduction which is not in excess of the amount of the credit allowed
pursuant to subdivisions (g) and (h) of section one hundred one of this
title.

(9) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
which would properly be includible for federal income tax purposes had
the taxpayer not made the election permitted pursuant to such paragraph
eight as it was in effect for agreements entered into prior to January
first, nineteen hundred eighty-four.

10. Upon the disposition of recovery property to which subdivision
thirteen of section one hundred six applies, the amount, of any, by
which the aggregate of the amounts described in such subdivision
thirteen attributable to such property exceeds the aggregate of the
amounts described in subdivision twelve of section one hundred six
attributable to such property.

(c) Modifications reducing federal gross income.--There shall be
subtracted from federal gross income of the business the following items
attributable to the business:

(1) Interest income on obligations of the United States and its
possessions to the extent includible in gross income for federal income
tax purposes;

(2) Interest or dividend income on obligations or securities of any
authority, commission or instrumentality of the United States to the
extent includible in gross income for federal income tax purposes but
exempt from state or local income taxes under the laws of the United
States;

(3) Interest or dividend income on obligations or securities to the
extent exempt from income tax under the laws of the city or this state
authorizing the issuance of such obligations or securities but
includible in gross income for federal income tax purposes; and

(4) The amount of any refund or credit for overpayment of income taxes
imposed by the city, this state or any other taxing jurisdiction, to the
extent properly included in gross income for federal income tax
purposes.

(5) With respect to gain derived from the sale or other disposition of
any property acquired prior to January first, nineteen hundred
sixty-six, except property described in subsections one and four of
section twelve hundred twenty-one of the internal revenue code, the
difference between

(a) the amount of gain included in federal gross income with respect
to each such property, and

(b) the amount of gain (if smaller than the amount described in (a))
that would be included in federal gross income with respect to each such
property if the federal adjusted basis of such property on the date of
the sale or other disposition had been equal to its fair market value on
January first, nineteen hundred sixty-six, or the date of its sale or
other disposition prior to January first, nineteen hundred sixty-six,
plus or minus all adjustments to basis made with respect to such
property for federal income tax purposes for periods on and after
January first, nineteen hundred sixty-six; provided, however, that the
total modification provided by this subparagraph shall not exceed the
taxpayer's net gain from the sale or other disposition of all such
property.

(6) For taxable years beginning after December thirty-first, nineteen
hundred eighty-one, except with respect to property which is a qualified
mass commuting vehicle described in subparagraph (D) of paragraph eight
of subsection (f) of section one hundred sixty-eight of the internal
revenue code (relating to qualified mass commuting vehicles), any amount
properly includible in federal gross income solely as a result of an
election made pursuant to the provisions of such paragraph eight as it
was in effect for agreements entered into prior to January first,
nineteen hundred eighty-four.

(7) Upon the disposition of recovery property to which subdivision
thirteen of section one hundred six applies, the amount, if any, by
which the aggregate of the amounts described in subdivision twelve of
section one hundred six attributable to such property exceeds the
aggregate of the amounts described in subdivision thirteen of section
one hundred six attributable to such property.

(d) Upon the disposition of property to which subdivisions 14 and 15
of section 106 of this chapter apply, the amount of any gain or loss
includible in entire net income shall be adjusted to reflect the
modifications provided in such subdivisions attributable to such
property.