P.R. Laws tit. 13, § 30141
(a) Definitions.— As used in this part:
(1) Capital assets.— The term “capital assets” means property held by the taxpayer (whether or not connected with his/her trade or business), but does not include:
(A) Stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his/her trade or business;
(B) property used in his/her trade or business, of a character which is subject to the allowance for depreciation provided in § 30127 of this title, or real property used in his/her trade or business;
(C) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by:
(i) A taxpayer whose personal efforts created such property;
(ii) in the case of a letter, memorandum or similar property, a taxpayer for whom such property was prepared or produced, or
(iii) a taxpayer in whose hands the basis of such property is determined, for purposes of determining gain from a sale or exchange, in whole or in part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (i) or (ii); or
(D) accounts or notes receivable acquired in the ordinary course of trade or business for services rendered, or on account of loans, or from the sale of property as described in paragraph (A).
(E) renewable energy certificates, as such term is defined in the Puerto Rico Green Energy Incentives Act, §§ 10421 et seq. of this title.
(2) Short-term capital gain.— The term “short-term capital gain” means gain from the sale or exchange of a capital asset held for not more than six (6) months, if and to the extent that such gain is taken into account in computing gross income.
(3) Short-term capital loss.— The term “short-term capital loss” means loss from the sale or exchange of a capital asset held for not more than six (6) months, if and to the extent that such loss is taken into account in computing net taxable income.
(4) Long-term capital gain.— The term “long-term capital gain” means gain from the sale or exchange of a capital asset held for more than six (6) months, if and to the extent that such gain is taken into account in computing gross income.
(5) Long-term capital loss.— The term “long-term capital loss” means loss from the sale or exchange of a capital asset held for more than six (6) months, if and to the extent that such loss is taken into account in computing net taxable income.
(6) Net short-term capital gain.— The term “net short-term capital gain” means the excess of short-term capital gains for the taxable year over the short-term capital losses for such year.
(7) Net short-term capital loss.— The term “net short-term capital loss” means the excess of short-term capital losses for the taxable year over the short-term capital gains for such year.
(8) Net long-term capital gain.— The term “net long-term capital gain” means the excess of long-term capital gains for the taxable year over the long-term capital losses for such year.
(9) Net long-term capital loss.— The term “net long-term capital loss” means the excess of long-term capital losses for the taxable year over the long-term capital gains for such year.
(10) Net capital gain.—
(A) Corporations.— In the case of a corporation, the term “net capital gain” means the excess of the gains from the sale or exchange of capital assets over the losses from such sale or exchange.
(B) Other taxpayers.— In the case of a taxpayer other than a corporation, the term “net capital gain” means the excess of:
(i) The sum of the gains from the sale or exchange of capital assets, plus net income of the taxpayer or one thousand dollars ($1,000), whichever is less, over
(ii) the losses from such sale or exchange. For purposes of this paragraph, net income shall be computed without regard to gains or losses from the sale or exchange of capital assets.
(11) Net capital loss.— The term “net capital loss” means the excess of the losses from the sale or exchange of capital assets over the sum allowed under subsection (c). For purposes of determining losses under this clause, the amounts which are short-term capital losses under subsection (d) of this section shall be excluded.
(b) Special tax in the case of a taxpayer other than a corporation.— If for any taxable year, the net long-term capital gain of any taxpayer other than a corporation exceeds the net short-term capital loss, the tax provided in § 30082 of this title shall be levied, collected, and paid.
(c) Limitation on capital losses.—
(1) Corporations.— -In the case of a corporation, losses from the sale or exchange of capital assets incurred in a taxable year shall be allowed only up to the amount of the gains from such sale or exchange generated during said taxable year. Provided, That in the case of losses carried over from previous taxable years, the same shall be allowed up to ninety percent (90%) of the net gain from the sale of capital assets occurred during the taxable year in which the loss is claimed, for taxable years beginning after December 31, 2013 and ending before January 1, 2015; and up to eighty percent (80%) of the net gain generated from the sale of capital assets made during the taxable year in which the loss is claimed, for taxable years beginning after December 31, 2014.
(2) Other taxpayers.— In the case of a taxpayer other than a corporation, losses from the sale or exchange of capital assets shall be allowed only to the total amount of the gains from such sale or exchange, plus the net income of the taxpayer or one thousand dollars ($1,000), whichever is less.
For purposes of this subsection, net income shall be computed regardless of gains or losses from the sale or exchange of capital assets.
(d) Capital loss carry-over.— If for any taxable year beginning after June 30, 1995, the taxpayer has a net capital loss, the total amount thereof shall be a short-term capital loss in each of the five (5) succeeding taxable years, to the extent that such amount exceeds the total of any net capital gains for each of the prior taxable years in which the net capital loss may be carried over and such succeeding taxable year. In the case of net capital losses realized in taxable years beginning after December 31, 2005 and before December 31, 2012, the carry-over period shall be ten (10) years. For purposes of this subsection, a net capital gain shall be computed regardless of such net capital loss or any net capital losses arising in any such prior taxable years.
(e) Withdrawal of bonds and other securities.— For purposes of this part, amounts received by the holder upon the withdrawal of bonds, debentures, notes, or certificates, or other evidences of indebtedness issued by any corporation or partnership, including those issued by a government or political subdivision thereof, with interest coupons or in registered form, shall be considered as amounts received in exchange therefor.
(f) Short sales and options.— For purposes of this part:
(1) Gains or losses from short sales of property shall be considered as gains or losses from sales or exchanges of capital assets; and
(2) gains or losses attributable to the failure to exercise privileges or options to buy or sell property shall be considered as short-term capital gains or losses.
(g) Determination of holding period of property.— For purposes of this section:
(1) In determining the period for which the taxpayer has held property received in an exchange, there shall be included the period for which he held the property exchanged if, under § 30142 of this title, the received property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in the hands of the taxpayer as the property exchanged. For purposes of this clause, an involuntary conversion described in § 30144(f) of this title shall be considered an exchange of the property converted for the property acquired.
(2) In determining the period for which the taxpayer has held property, however acquired, there shall be included the period during which such property was held by any other person, if under §§ 30142, 30341, 30576 or 30577 of this title, such property has, for purposes of determining gain or loss from a sale or exchange, the same basis, in whole or in part, in the hands of the taxpayer as it would have in the hands of such other person.
(3) In determining the period for which the taxpayer has held stock or securities received through a corporate distribution in which no gain was recognized to the shareholders under the provisions of Section 6(c) of the Income Tax Act of 1924, there shall be included the period for which the taxpayer held the stock or securities in the issuing corporation prior to the receipt of such stock or securities upon such distribution.
(4) In determining the period for which the taxpayer has held stock or securities, the acquisition of which (or the contract or option to acquire which) resulted in the nondeductibility (under § 30147 of this title or under Section 16(a)(5) of the Income Tax Act of 1924, relating to wash sales) of the loss from the sale or other disposition of substantially identical stock or securities, there shall be included the period for which the taxpayer held the stock or securities, the loss from the sale or other disposition of which was not deductible.
(5) In determining the period for which the taxpayer has held stock or rights to acquire stock received on a distribution, if the basis of such stock or rights is determined under § 30142(a)(14)(A) of this title, there shall, under regulations prescribed by the Secretary, be included the period for which the taxpayer held the stock in the distributing corporation prior to the receipt of such stock or rights upon such distribution.
(6) In determining the period for which the taxpayer has held stock or securities acquired from a corporation by the exercise of rights to acquire such stock or securities, only the period beginning with the date on which the right to acquire was exercised shall be included.
(7) In determining the period for which the taxpayer has held a residence or sole proprietorship, the acquisition of which resulted under subsection (m) or (n) of § 30144 of this title in the nonrecognition of any part of the gain realized on the sale, exchange, or involuntary conversion of another residence or another sole proprietorship, there shall be included the period for which such other residence or other proprietorship had been held as of the date of such sale, exchange, or involuntary conversion.
(h) Gains and losses from involuntary conversion and from the sale or exchange of certain property used in the trade or business.—
(1) Definition of property used in the trade or business.— For purposes of this subsection, the term “property used in the trade or business” means property used in the trade or business, of a character which is subject to the allowance for depreciation provided in § 30127 of this title, held for more than six (6) months, and real property used in the trade or business, held for more than six (6) months, which is not:
(A) Property of a kind which would properly be includible in the inventory of the taxpayer if on hand at the close of the taxable year, or
(B) property held by the taxpayer primarily for sale to customers in the ordinary course of his/her trade or business, or
(C) a copyright, a literary, musical, or artistic composition, a letter or memorandum or similar property, held by a taxpayer described in subsection (a)(1)(C).
(2) General rule.— If during the taxable year the recognized gains on the sale or exchange of property used in the trade or business, plus the recognized gains from the compulsory or involuntary conversion (see § 30144(f)(3) of this title for cases of individuals, as a result of destruction, in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or imminence thereof), of property used in the industry or business and capital assets held for more than six (6) months into other property or money, exceed the recognized losses from such sales, exchanges, and conversions, such gains and losses shall be considered as gains and losses from sales or exchanges of capital assets held for more than six (6) months. If such gains do not exceed such losses, such gains and losses shall not be considered as gains and losses of capital assets. For purposes of this clause:
(A) In determining under this clause whether gains exceed losses, the gains described therein shall be included only if, and to the extent, taken into account in computing gross income, and the losses described therein shall be included only if, and to the extent, taken into account in computing net income, except that subsection (c) shall not apply.
(B) Losses due to the destruction, in whole or in part, theft or seizure, or requisition or condemnation of property used in the trade or business, or capital assets held for more than six (6) months, shall be treated as losses from a compulsory or involuntary conversion.
(i) Collapsible corporations.—
(1) Treatment of gain to shareholders.— Gain from:
(A) The sale or exchange of stock of a collapsible corporation;
(B) a distribution in partial or complete liquidation of a collapsible corporation, which distribution is treated as in part or full payment in exchange for stock; and
(C) a distribution made by a collapsible corporation which is treated, to the extent it exceeds the basis of the stock, in the same manner as a gain from the sale or exchange of property, to the extent that it would be considered (except for the provisions of this subsection) gain from the sale or exchange of a capital asset shall, except as provided for in clause (4), be considered gain from the sale or exchange of property which is not a capital asset.
(2) Definitions.—
(A) Collapsible corporation.— For purposes of this subsection, the term “collapsible corporation” means a corporation formed or principally organized for the manufacture, construction or production of property, for the purchase of property, which (in the hands of the corporation) is property described in paragraph (C), or for the holding of stock in a corporation so formed or availed of, with a view to:
(i) The sale or exchange of stock by its shareholders (whether in liquidation or otherwise), or a distribution to its shareholders, before the realization by the corporation manufacturing, constructing, producing, or purchasing the property, of a substantial part of the net income to be derived from such property, and
(ii) the realization of gain by such shareholders attributable to such property.
(B) Production or purchase of property.— For purposes of paragraph (A), a corporation shall be deemed to have manufactured, constructed, produced, or purchased property, if:
(i) It engaged in the manufacture, construction, or production of such property to any extent;
(ii) it holds property having a basis determined, in whole or in part, by reference to the cost of such property in the hands of a person who manufactured, constructed, produced, or purchased the property, or
(iii) it holds property having a basis determined, in whole or in part, by reference to the cost of property manufactured, constructed, produced, or purchased by the corporation.
(C) Section § 30141(i) of this title assets.— For purposes of this subsection, the term “Section 30141(i) of this title assets” means property held for a period of less than three (3) years, which is:
(i) Stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year;
(ii) property held by the corporation primarily for sale to customers in the ordinary course of its trade or business;
(iii) unrealized receivables or fees, except receivables from sales of property other than property described in this paragraph, or
(iv) property described in § 30141(h) of this title (without regard to any holding period therein provided), except such property which is or has been used in connection with the manufacture, construction, production or sale of property described in subparagraph (i) or (ii).
In determining whether the three (3) year holding period specified in this paragraph has been satisfied, § 30141(g) of this title shall apply, but no such period shall be deemed to begin before the completion of the manufacture, construction, production or purchase.
(D) Unrealized receivables.— For purposes of paragraph (C)(iii), the term “unrealized receivables or fees” means, to the extent not previously includible in income under the method of accounting used by the corporation, any rights (contractual or otherwise) to payment for:
(i) Goods delivered, or to be delivered, to the extent the proceeds therefrom would be treated as amounts received from the sale or exchange of property other than a capital asset, or
(ii) services rendered or to be rendered.
(3) Presumption in certain cases.—
(A) In general.— For purposes of this subsection, a corporation shall be deemed to be, unless shown otherwise, a collapsible corporation if, at the time of the sale or exchange or the distribution described in clause (1), the fair market value of its § 30141(i) of this title assets (as defined in clause (2)(C)) is:
(i) Fifty percent (50%) or more of the fair market value of its total assets, and
(ii) one hundred twenty percent (120%) or more of the adjusted basis of such § 30141(i) of this title assets.
Absence of the conditions described in subparagraph (i) and (ii) shall not give rise to a presumption that the corporation was not a collapsible corporation.
(B) Determination of total assets.— In determining the fair market value of the total assets of a corporation for purposes of paragraph (A)(i), there shall not be taken into account:
(i) Cash,
(ii) obligations which are capital assets in the hands of the corporation, and
(iii) stock in any other corporation or partnership.
(4) Limitations on the application of this subsection.— In the case of gain realized by a shareholder in respect to his/her stock in a collapsible corporation, this section shall not apply:
(A) Unless, at any time after the commencement of the manufacture, construction, or production of the property, or at the time of the purchase of the property described in clause (2)(C) or at any time thereafter, such shareholder:
(i) Owned (or was considered as owning) more than five percent (5%) in value of the issued stock of the corporation, or
(ii) owned stock of such corporation which was considered as owned at such time by another shareholder who then owned (or was considered as owning) more than five percent (5%) in value of the issued stock of the corporation;
(B) to the gain recognized during a taxable year, unless more than seventy percent (70%) of such gain is attributable to the property so manufactured, constructed, produced or purchased, and
(C) to the gain realized after the expiration of three (3) years following the completion of such manufacture, construction, production, or purchase.
For purposes of paragraph (A), the ownership of stock shall be determined in accordance with the rules prescribed in § 30137(b)(2) of this title, except that, in addition to the persons prescribed by paragraph (D) of that section, the family of an individual shall include the spouses of that individual’s brothers and sisters (whether by whole or half blood) and the spouses of that individual’s lineal descendants.
(j) Gain from the sale of certain property between an individual and a controlled corporation.—
(1) Treatment of gain as ordinary income.— In the case of a sale or exchange, directly or indirectly, of property described in clause (2) between an individual and a corporation in respect to which more than eighty percent (80%) in value of the issued stock is owned by such individual, his/her spouse, and his/her minor children and minor grandchildren, any gain recognized to the transferor from the sale or exchange of such property shall be considered as gain from the sale or exchange of property which is neither a capital asset nor property described in subsection (h).
(2) Subsection applicable only to sales or exchanges of depreciable property.— This subsection shall apply only in the case of a sale or exchange of property, by a transferor, which in the hands of the transferee shall be property of a nature which is subject to the allowance for depreciation provided in § 30127 of this title.
(k) Losses on small business investment company stock.— If a loss is on stock in a small business investment company operating in Puerto Rico under the Act of the United States Congress, known as the “Small Business Investment Act of 1958,” and such loss would (but for this subsection) be a loss from the sale or exchange of a capital asset, then such loss shall be treated as a loss from the sale or exchange of property which is not a capital asset. For purposes of § 30134 of this title (relating to the net operating loss deduction), any amount of loss treated by reason of this subsection as a loss from the sale or exchange of property which is not a capital asset, shall be treated as attributable to a trade or business of the taxpayer.
(l) Loss of small business investment company.— In the case of a small business investment company operating in Puerto Rico under the Act of the United States Congress known as “Small Business Investment Act of 1958”, if:
(1) A loss is on convertible debentures (including stock received pursuant to the conversion privilege) acquired pursuant to Section 304 of the Small Business Investment Act of 1958, and
(2) such loss would (but for this subsection) be a loss from the sale or exchange of a capital asset, then such loss shall be treated as a loss from the sale or exchange of property which is not a capital asset.
Notice This section has more than one version with varying effective dates. Second of two versions of this section.
History —Jan. 31, 2011, No. 1, § 1034.01, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 39; Aug. 16, 2012, No. 179, § 2; Sept. 30, 2015, No. 159, § 5.