The Virginia Court of Appeals recently held that the Virginia Department of Taxation cannot make it a requirement for a corporation to include the income and factors of a 17% owned LLC with its own income and factors as a unitary business. The taxpayer obtained the interest in question in exchange for the sale of several travel centers to a buyer LLC during bankruptcy proceedings. The court based their decision on the facts that the taxpayer and the buyer were not centrally managed, the companies shared no business activities, derived no economies of scale, and obtained no cost efficiencies they would not have been able to get on their own from their relationship. This decision demonstrates that entities taxed as partnerships are not always unitary entities, despite the position of a taxing agency.
