Idaho Admin. Code r. 35.01.01.171

Current through September 2, 2024

Section 35.01.01.171 - IDAHO CAPITAL GAINS DEDUCTION - QUALIFIED PROPERTY

Section 63-3022H, Idaho Code

01.Gain from Forfeited Rights and Payments. Gain attributable to a cancellation, lapse, expiration, or other termination of a contract right or obligation does not qualify for the Idaho capital gains deduction. This includes any gain from the lapse of an option or from forfeited earnest money, down payment, or similar payments, related to otherwise qualifying property.

02.Timber. As used in Section 63-3022H(3)(e), Idaho Code, qualified timber grown in Idaho includes:

a. Standing timber held as investment property that is a capital asset pursuant to Section 1221, Internal Revenue Code; and

b. Cut timber if the taxpayer elects to treat the cutting of timber as a sale or exchange pursuant to Section 631(a), Internal Revenue Code.

03.Nonqualifying Property. Nonqualifying property includes:

a. Real or tangible personal property not having an Idaho situs.

b. Tangible personal property not used by a revenue-producing enterprise.

c. Intangible property. Some examples of intangible property include, but are not limited to:

i. Stocks and bonds;

ii. Interests in a partnership (except for interests identified in Section 63-3022H(3)(f)), Idaho Code, LLC, or S corporation.

04.Holding Periods.

a. In General. To qualify for the capital gains deduction, property otherwise eligible for the Idaho capital gains deduction must be held for specific time periods. The holding periods for Idaho purposes generally follow Sections 1223 and 735, Internal Revenue Code.

b. Exception to the Tacked-On Holding Period. The holding period of property given up in a tax-free exchange is not tacked on to the holding period of the property received if the property given up was nonqualifying property based on the requirements of Section 63-3022H(3), Idaho Code.

c. Installment Sales. The determination of whether the property meets the required holding period is made using the laws applicable for the year of the sale. If the required holding period is not met in the year of sale, the gain is not from qualified property. The classification as nonqualified property will not change even though the gain may be reported in subsequent years when a reduced holding period is applicable.

05.Holding Periods of S Corporation and Partnership Property.

a. Property Contributed by a Shareholder to an S Corporation or by a Partner to a Partnership. A shareholder or partner who contributes otherwise qualified property to an S corporation or partnership may treat the pass-through gain on the sale of that property as a qualifying Idaho capital gain if the property has, in total, been held by the shareholder or partner and the S corporation or partnership for the required holding period. The noncontributing shareholders or partners may treat the pass-through gain as a qualifying Idaho capital gain only if the S corporation or partnership held the property for the required holding period.

b. Property Distributed by an S Corporation or Partnership.

i. Distributions. For purposes of this rule, the holding period of property received in a distribution from a partnership or from an S corporation other than in liquidation of stock includes the time the entity held the property.

06.Examples. Available at Income Tax Rules Examples.

Idaho Admin. Code r. 35.01.01.171

Effective April 6, 2023