§ 106. Unincorporated business deductions. The unincorporated business\ndeductions of an unincorporated business means the items of loss and\ndeduction directly connected with or incurred in the conduct of the\nbusiness, which are allowable for federal income tax purposes for the\ntaxable year (including losses and deductions connected with any\nproperty employed in the business), with the following modifications:\n (1) A deduction shall be allowed for charitable contributions of the\nunincorporated business, to the extent that such contributions would be\ndeductible for federal income tax purposes if made by a corporation, but\nnot in excess of five per centum of the amount by which the\nunincorporated business gross income exceeds the unincorporated business\ndeductions computed without the benefit of any deduction for charitable\ncontributions.\n (2) A deduction shall be allowed for net operating losses incurred by\nthe unincorporated business in an amount computed in the same manner as\nthe net operating loss deduction which would be allowable for the\ntaxable year for federal income tax purposes if the unincorporated\nbusiness were an individual taxpayer (but determined solely by reference\nto the unincorporated business gross income and unincorporated business\ndeductions, allocated to the city, of the unincorporated business). Such\ndeduction shall not include any net operating loss sustained during any\ntaxable year ending prior to January first, nineteen hundred sixty-six\nand for the purposes of this paragraph net operating losses shall be\ndetermined without regard to any deductions allowed pursuant to\nsubsection (b) of section one hundred eight and any net operating loss\nfor a taxable year beginning in nineteen hundred eighty-one shall be\ncomputed without regard to the deduction allowed with respect to\nrecovery property under section one hundred sixty-eight of the internal\nrevenue code; in lieu of such deduction, a taxpayer shall be allowed for\nsuch taxable year with respect to such property the depreciation\ndeduction allowable under section one hundred sixty-seven of such code\nas such section was in full force and effect on December thirty-first,\nnineteen hundred eighty.\n (3) No deduction shall be allowed (except as provided in section one\nhundred eight) for amounts paid or incurred to a proprietor or partner\nfor services or for use of capital.\n (4) No deduction shall be allowed for income taxes imposed by the\ncity, this state or any other taxing jurisdiction.\n (5) No deduction shall be allowed for (A) interest on indebtedness\nincurred or continued to purchase or carry obligations or securities the\nincome from which is exempt from tax under this title; (B) expenses paid\nor incurred for the production or collection of such income or the\nmanagement, conservation or maintenance of property held for the\nproduction of such income; or (C) the amortizable bond premium on any\nbond the interest income from which is so exempt.\n (6) No deduction shall be allowed in respect of the excess of net\nlong-term capital gain over net short-term capital loss, but capital\nlosses incurred in the unincorporated business shall be treated as\nordinary losses and shall be allowed in full.\n (7) In the case of a taxpayer who has exercised the election permitted\nby subdivision (b) of section one hundred eight, no deduction shall be\nallowed for expenditures with reference to the property to which such\nelection relates, or for depreciation of such property, except as\npermitted by said subdivision.\n (8) A deduction shall be allowed for (A) interest on indebtedness\nincurred or continued to purchase or carry obligations or securities the\nincome from which is subject to tax under this title but exempt from\nfederal income tax; (B) ordinary and necessary expenses paid or incurred\nduring the taxable year for the production or collection of such income\nor the management, conservation or maintenance of property
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