House
Study
Bill
45
-
Introduced
HOUSE
FILE
_____
BY
(PROPOSED
COMMITTEE
ON
WAYS
AND
MEANS
BILL
BY
CHAIRPERSON
SANDS)
A
BILL
FOR
An
Act
excluding
from
the
computation
of
net
income
capital
1
gains
realized
from
the
sale
of
all
or
substantially
all
of
2
the
equity
interests
in
certain
businesses
and
including
3
retroactive
applicability
provisions.
4
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
5
TLSB
1581YC
(9)
84
tw/sc
H.F.
_____
Section
1.
Section
422.7,
subsection
21,
paragraph
a,
1
subparagraph
(1),
Code
2011,
is
amended
to
read
as
follows:
2
(1)
(a)
Net
capital
gain
from
the
sale
of
real
property
3
used
in
a
business,
in
which
the
taxpayer
materially
4
participated
for
ten
years,
as
defined
in
section
469(h)
5
of
the
Internal
Revenue
Code,
and
which
has
been
held
for
6
a
minimum
of
ten
years,
or
from
the
sale
of
a
business,
as
7
defined
in
section
423.1
,
in
which
the
taxpayer
materially
8
participated
for
ten
years,
as
defined
in
section
469(h)
of
the
9
Internal
Revenue
Code,
and
which
has
been
held
for
a
minimum
10
of
ten
years.
The
sale
of
a
business
means
the
sale
of
all
or
11
substantially
all
of
the
tangible
personal
property
,
intangible
12
property,
or
service
of
the
business.
“Sale
of
a
business”
13
includes
the
sale
of
all
or
substantially
all
of
the
stock
or
14
equity
interests
in
the
business,
whether
the
business
is
held
15
as
a
proprietorship,
corporation,
partnership,
joint
venture,
16
trust,
limited
liability
company,
or
another
business
entity.
17
(b)
However,
where
If
the
business
is
sold
to
individuals
18
who
are
all
lineal
descendants
of
the
taxpayer,
the
taxpayer
19
does
not
have
to
have
materially
participated
in
the
business
20
in
order
for
the
net
capital
gain
from
the
sale
to
be
excluded
21
from
taxation.
22
(c)
However,
in
In
lieu
of
the
net
capital
gain
deduction
in
23
this
paragraph
and
paragraphs
“b”
,
“c”
,
and
“d”
,
where
if
the
24
business
is
sold
to
individuals
who
are
all
lineal
descendants
25
of
the
taxpayer,
the
amount
of
capital
gain
from
each
capital
26
asset
may
be
subtracted
in
determining
net
income.
27
Sec.
2.
RETROACTIVE
APPLICABILITY.
This
Act
applies
28
retroactively
to
January
1,
2011,
for
tax
years
beginning
on
29
or
after
that
date.
30
EXPLANATION
31
This
bill
relates
to
the
taxation
of
capital
gains
on
the
32
sale
of
assets
held
in
a
business.
33
Current
law
provides
an
exclusion
from
the
computation
of
34
net
income
for
any
capital
gains
realized
from
the
sale
of
35
-1-
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1581YC
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1/
2
H.F.
_____
all
or
substantially
all
of
the
tangible
personal
property
or
1
service
of
a
business
if
the
taxpayer
materially
participated
2
in
the
business
and
held
the
assets
for
at
least
10
years.
This
3
exclusion,
however,
does
not
extend
to
the
sale
of
stock
or
4
other
equity
interests
in
the
business.
The
bill
applies
the
5
exclusion
to
the
sale
of
intangible
property
of
the
business,
6
including
stock
or
other
equity
interests
in
the
business.
7
The
bill
applies
retroactively
to
January
1,
2011,
for
tax
8
years
beginning
on
or
after
that
date.
9
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tw/sc
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2