A.R.S. 43-1131(1) Interpretation
In Arizona's Corporate Tax Ruling 98-2, at 3, the Department emphasized that whether the gain resulting from a 338(h)(10) election is to be considered business or non-business income depends on an application of the second clause of A.R.S. 43-1131(1):
The gain from the deemed sale of the target's assets is usually treated as business income subject to apportionment.
If any portion of the gain is attributable to the sale of nonbusiness assets, that portion of the gain would be treated as nonbusiness income subject to allocation.