An insolvent taxpayer who did not actually make lease payments for a vessel it leased was found to still be liable for the tax due on the entire value of the lease. Under New York Tax Law, long-term leases of certain motor vehicles, noncommercial aircraft, and vessels have special rules for computing receipts. All payments under leases of this type are “deemed to have been paid or given, and shall be subject to tax, and any such tax shall be collected, as of the date of first payment under such lease”. Since all lease payments were deemed made on the date the first payment was due, the tax was also deemed due at that time, regardless of if the lease payments were actually made.
Further, the taxpayer’s claim that the relationship between it and the leasor was that of a joint venture, and not a true lease, was rejected because the parties are bound by the form they have chosen, and may not disregard this arrangement due to disadvantageous tax consequences. Sales tax was also assessed on the bulk transfer of all business assets from the taxpayer to the leasor in consideration for its release from debt, despite the taxpayer’s unfounded claims of double taxation and that certain assets should be classified as land improvements. (Freeport Casino Cruises, LLC, New York Department of Tax Appeals, Administrative Law Judge Unit, DTA Nos. 822383 and 822384, August 27, 2009)