I dissent. I would annul the deficiency assessment and declare subdivision 8 of section R46-4.0 of the Administrative Code of the City of New York void as an impermissible delegation of legislative authority without guidelines for the exercise of the discretion authorized.
In this transferred CPLR article 78 proceeding, petitioner, Barney’s, Inc., challenges a final determination of general corporation tax deficiency assessed by respondent, the Department of Finance of the City of New York.
Barney’s, Inc., which derives all of its business income from retail sales conducted within the City of New York, also realizes income from certain investment capital valued at between approximately $6,000,000 and $8,000,000 during the tax period in question.
Under title R of chapter 46 of the Administrative Code, investment income (§ R46-2.0, subd 5) may be taxed at a lower rate than business income (§ R46-2.0, subd 7), depending on the investment allocation formula (see § R464.0). Inasmuch as all of Barney’s business income was derived from sales within the City of New York, Barney’s had a business allocation percentage of 100% for the relevant taxable period.
In accordance with the formula contained in the Administrative Code for allocation of investment income to the *649City of New York, petitioner computed its investment income percentage at less than 1%. Petitioner’s investment portfolio during the relevant taxable period consisted almost entirely of obligations of the United States or of New York State or its subdivisions. Section R46-4.0 (subd 3, par [b], cl [3]) excludes such governmental obligations as factors in computing the investment allocation percentage, and provides that if the investment allocation percentage is zero, then the business allocation percentage, in this case 100%, will apply.
Presumably to raise the investment allocation formula from zero, and thus avoid the application of the business allocation percentage to its investment income, petitioner included 100 shares of Kerr-McGee stock. Section R46-4.0 (subd 3, par [b], cl [1]) provides that, for purposes of computing the investment allocation percentage with respect to stock, the allocation percentage to the City of New York of the issuer of that stock will be used. Thus, petitioner’s investment income allocation percentage for the income from its investment capital was derived by averaging the allocation formula for Kerr-McGee with the zero allocation percentage for certain State of Israel bonds held by petitioner, all in strict conformity with the dictates of the Administrative Code.
The Department of Finance, acting under the authority of subdivision 8 of section R46-4.0,* excluded the Kerr-McGee stock from the computation of petitioner’s investment allocation formula, leaving only governmental obligations, with the result that petitioner’s investment income would be taxed at the same rate as its business income.
Petitioner argues that the discretion authorized by subdivision 8 is impermissibly vague and an unconstitutional *650delegation of legislative authority because no guidelines are provided for its exercise.
Respondent, the Department of Finance, concedes that it has issued no rulings interpreting the section, but states that it has received no requests for rulings. Perhaps the discretion authorized by the subdivision has not previously been exercised or challenged.
In computing its tax liability, a taxpayer should not be at the mercy of the tax collector’s whim, but should be able to project with some degree of exactitude the amounts due.
The acquisition of the Kerr-McGee shares, though perhaps motivated solely by a desire to decrease taxes, was not a sham transaction. In the words of Learned Hand, “a transaction, otherwise within an exception of the tax law, does not lose its immunity, because it is actuated by a desire to avoid, or, if one choose, to evade taxation. Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” (Ses Helvering v Gregory, 69 F2d 809, 810; see, also, Mapco Inc. v United States, 556 F2d 1107, 1110.)
By attempting to reduce its tax obligation by purchasing the Kerr-McGee stock, petitioner has not crossed the line between permissible avoidance and impermissible evasion, but has merely attempted to avail itself to the full of what the law permits. (See Bullen v Wisconsin, 240 US 625, 630.)
The defect in the statutory framework of the Administrative Code is that it is unclear what the law permits. A taxpayer is not afforded notice, by guidelines or" departmental rulings, of when or how the department will exercise its discretion. Such guidelines are necessary to prevent administrative action pursuant to a grant of unfettered discretion from being arbitrary and capricious as a matter of law. (See Matter of Nicholas v Kahn, 47 NY2d 24, 34.)
Accordingly, the petition should be granted by annulling the final determination of general business tax deficiency and declaring subdivision 8 of section R46-4.0 of the Administrative Code void.
*651Sandler, Silverman and Alexander, JJ., concur with Asch, J.; Kupferman, J. P., dissents in an opinion.
Determination of respondent dated January 27, 1982, confirmed, without costs and without disbursements.
That subdivision provides in pertinent part: “8. If it shall appear to the director of finance that any business or investment allocation percentage determined as herein-above provided does not properly reflect the activity, business, income or capital of a taxpayer within the city, the director of finance shall be authorized in his discretion * * * in the case of an investment allocation percentage to adjust it by excluding one or more assets in computing such percentage provided the income therefrom is also excluded in determining entire net income. The director of finance from time to time shall publish all rulings of general public interest with respect to any application of the provisions of this subdivision” (emphasis supplied).