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ALABAMA
The Alabama Supreme Court has denied the Alabama Department of Revenue's petition for a writ of certiorari in Lanzi v. Alabama Department of Revenue, Ala. Ct. Civ. App., No. 2040298 6/30/06, 2006 WL 1793221, cert. den. Ala. S.Ct., No. 1051475,4/13/07. Thus, the high court let stand the opinion of the Alabama Court of Civil Appeals that a nonresident limited partner in an Alabama investment partnership did not have nexus with the state for individual income tax purposes.
Taxpayer was a passive investor. The taxpayer, Joe Lanzi, was a resident of Atlanta, Georgia and a limited partner in Quad-L Limited Partnership, an Alabama limited partnership formed to manage certain Lanzi family investments. The general partners were Lanzi's parents, who resided in Birmingham, Alabama. The partnership bought and sold stocks, bonds, and other marketable securities, and received dividends, interest, and any gains from the sale of the securities. The general partners managed the partnership's investments, which were held primarily through an account with a California-based brokerage firm that has offices throughout the U.S. (including in Alabama).
The parties stipulated that Lanzi, as a limited partner, did not participate in the management of the partnership's assets and that he was "a mere passive investor" in the partnership. In addition, it was undisputed that, apart from his interest in the partnership, Lanzi owned no property, conducted no business, and had no economic ties to Alabama. He received distributions from the partnership that he reported as income for state purposes on only his Georgia resident income...