Section 45IAC3.1-1-59. Interest as nonbusiness income

   Interest. Interest income is nonbusiness income if the intangible with respect to which the interest was received did not arise out of or was not created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the intangible was not related to or incidental to such trade or business operations. The term "interest" as used in this regulation [45 IAC 3.1-1-59] includes service charges, time-price differentials, and all other charges for the use of money.

  Examples:

  (1) The taxpayer operates a multistate chain of department stores, selling for cash and on credit. Service charges, interest, or time-price differentials and the like are received with respect to installment sales and revolving charge accounts. These amounts are business income.

  (2) The taxpayer conducts a multistate manufacturing business. During the year the taxpayer receives a Federal income tax refund and collects a judgment against a debtor of the business. Both the tax refund and the judgment bore interest. The interest income is business income.

  (3) The taxpayer is engaged in a multistate manufacturing and wholesaling business. In connection with that business, the taxpayer maintains special accounts to cover such items as Workmen's Compensation claims, rain and storm damage, machinery replacement, etc. The monies in those accounts are invested as interest. Similarly, the taxpayer temporarily invests funds intended for payment of Federal, State and local tax obligations. The interest income is business income.

  (4) The taxpayer is engaged in a multistate money order and traveler's checks business. In addition to the fees received in connection with the sale of the money orders and traveler's checks, the taxpayer earns interest income by the investment of the funds pending their redemption. The interest income is business income.

  (5) The taxpayer is engaged in a multistate manufacturing and selling business. The taxpayer usually has working capital and extra cash totaling $200,000 which it regularly invests in short-term interest bearing securities. The interest income is business income.

  (6) In January the taxpayer sold all stock of a subsidiary for $20,000,000. The funds are placed in a separate interest-bearing account pending a decision by management as to how the funds are to be utilized. The interest income is business income.

  (7) The taxpayer, a multistate manufacturer, purchases and maintains a portfolio of interest-bearing securities for investment purposes. The interest from such securities is nonbusiness income.

  Nonbusiness interest is allocated to Indiana if the taxpayer's commercial domicile is in this state. (Department of State Revenue; Reg 6-3-2-2(j)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1530; errata, 2 IR 1743)