House Study Bill 272 



                                       HOUSE FILE       
                                       BY  (PROPOSED COMMITTEE ON
                                            WAYS AND MEANS BILL BY
                                            CHAIRPERSON SHOMSHOR)


    Passed House,  Date               Passed Senate, Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act excluding from the computation of net income capital gains
  2    realized from the sale of all or substantially all of the
  3    equity interests in certain businesses and including a
  4    retroactive applicability date provision.
  5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  6 TLSB 2341HC 83
  7 tw/mg:sc/5

PAG LIN



  1  1    Section 1.  Section 422.7, subsection 21, paragraph a,
  1  2 subparagraph (1), Code 2009, is amended to read as follows:
  1  3    (1)  (a)  Net capital gain from the sale of real property
  1  4 used in a business, in which the taxpayer materially
  1  5 participated for ten years, as defined in section 469(h) of
  1  6 the Internal Revenue Code, and which has been held for a
  1  7 minimum of ten years, or from the sale of a business, as
  1  8 defined in section 423.1, in which the taxpayer materially
  1  9 participated for ten years, as defined in section 469(h) of
  1 10 the Internal Revenue Code, and which has been held for a
  1 11 minimum of ten years.  The sale of a business means the sale
  1 12 of all or substantially all of the tangible personal property,
  1 13 intangible property, or service of the business.  "Sale of a
  1 14 business" includes the sale of all or substantially all of the
  1 15 stock or equity interests in the business, whether the
  1 16 business is held as a proprietorship, corporation,
  1 17 partnership, joint venture, trust, limited liability company,
  1 18 or another business entity.
  1 19    (b)  However, where If the business is sold to individuals
  1 20 who are all lineal descendants of the taxpayer, the taxpayer
  1 21 does not have to have materially participated in the business
  1 22 in order for the net capital gain from the sale to be excluded
  1 23 from taxation.
  1 24    (c)  However, in In lieu of the net capital gain deduction
  1 25 in this paragraph and paragraphs "b", "c", and "d", where if
  1 26 the business is sold to individuals who are all lineal
  1 27 descendants of the taxpayer, the amount of capital gain from
  1 28 each capital asset may be subtracted in determining net
  1 29 income.
  1 30    Sec. 2.  RETROACTIVE APPLICABILITY.  This Act applies
  1 31 retroactively to January 1, 2009, for tax years beginning on
  1 32 or after that date.
  1 33                           EXPLANATION
  1 34    This bill relates to the taxation of capital gains on the
  1 35 sale of assets held in a business.
  2  1    Current law provides an exclusion from the computation of
  2  2 net income for any capital gains realized from the sale of all
  2  3 or substantially all of the tangible personal property or
  2  4 service of a business if the taxpayer materially participated
  2  5 in the business and held the assets for at least 10 years.
  2  6 This exclusion, however, does not extend to the sale of stock
  2  7 or other equity interests in the business.  The bill applies
  2  8 the exclusion to the sale of intangible property of the
  2  9 business, including stock or other equity interests in the
  2 10 business.
  2 11    The bill applies retroactively to January 1, 2009, for tax
  2 12 years beginning on or after that date.
  2 13 LSB 2341HC 83
  2 14 tw/mg:sc/5