Taxation Law in Missouri

Editor:
John P. Barrie, Esquire

Income Tax - Income from “Rabbi Trust” determined to be non-business income. MINACT, Inc. v. Director of Revenue, No. 10-1951RI (Mo. AHC, January 28, 2013), Dandamudi, C.

The taxpayer, a Mississippi based corporation, used a grantor trust (“Rabbi Trust”) to fund its nonqualified, unfunded deferred executive compensation plan for certain key employees and treated the income earned in the trust as non-business income allocable to Mississippi. The director determined that the income was business income apportionable to Missouri. The taxpayer appealed the director’s determination.

Held:
Income was non-business income. The commission found that the income earned in the trust was not business income because the investment in the trust was not a business transaction in which the taxpayer regularly engaged (transactional test) and the taxpayer had no involvement in the management of the trust property (functional test).