New York: New York City Tax Appeals Tribunal Upholds Interest Deduction in Unincorporated Business Tax Case

The New York City Tax Appeals Tribunal upheld a taxpayer’s unincorporated business tax interest deduction for financing an equity partner’s redemption. After the IRS accepted the deduction on federal tax returns, the New York City Department of Finance disallowed 94 percent of it, claiming it wasn’t business-related. The Tribunal determined that the city’s tax statute should conform to federal treatment of deductions, rejecting arguments for a separate “directly connected” requirement. Ultimately, the Tribunal ruled that the taxpayer’s interest deduction was valid for city tax purposes. [N.Y.C. Tax App. Trib., No. TAT-E-20-32-UB, 11/19/25]

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