A Goldman Sachs offshore fund must pay city general corporation tax on capital gains it made after selling an interest in a hedge fund manager because of the “nexus” between the city and the hedge fund manager’s city-based activities that generated investment income for the fund.

The Appellate Division, First Department court has ruled that even though the fund, called Goldman Sachs Petershill Fund Offshore Holdings (Delaware) Corp., had “no other presence” in New York City other than the minority interest in Claren Road Asset Management LLC, “the business activities conducted in the City by the entity in which the taxpayer [Goldman Sachs Petershill Fund Offshore] had invested provided a nexus between the taxpayer’s capital gain and the City,” citing the New York Court of Appeals’ 1991 decision in Matter of Allied-Signal v. Commissioner of Finance.