Do you have employees working in Iowa?

Do you have employees working in Iowa?

Iowa Capital Gain Deduction & IA 100 Form Series Matt Bishop Iowa Capital Gain Deduction Statutory and Rule Citations

Iowa Code section 422.7(21) Iowa Administrative Rule 701-40.38(422) Various federal statutes, rules, and court cases, as applicable to Iowa Numerous cases and policy letters in Iowa tax research library Capital gain flowchart Department website

IA 100 form series What is the Iowa Capital Gain Deduction? When an individual realizes long term capital gain for federal purposes, Iowa law may allow the taxpayer to deduct the gain for state individual income tax purposes in certain circumstances.

Usually must hold the property for a required time 1 to 10 years, depending on the property Usually must participate in the business For the sale of a business or real property used in a business, typically must materially participate in the business for the 10 years prior to the sale

What Is Long Term Capital Gain? IRS Tax Topic 409: Almost everything you own and use for personal or investment purposes is a capital asset. Examples include a home, personaluse items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the basis in

the asset and the amount you sell it for is a capital gain or a capital loss. Generally, an asset's basis is its cost to the owner What Is Long Term Capital Gain? Long-term capital gain Comes from an asset held more than 12 months

Short-term capital gain Comes from an asset held 12 months or less Held is not the same as owned The holding period may be longer than the ownership period. Example: For gifted or inherited property, the current owners holding period may include the time the property

was held by the previous owner. What Qualifies?

Sale of real property used in a business Sale of business Sale of cattle or horses Sale of other breeding livestock

Sale of timber held for one year or more 50% of gain from sale of stock of Iowa corporation to Iowa employee stock ownership plan (ESOP) What Qualifies? Taxpayer must be able to prove eligibility, ideally

using concurrent documentation. Deduction available for individual income tax only. The capital gain from sales by an S-corp, partnership, LLC, estate, or trust may qualify for deduction if the gain flows to an individual. Sales by a C-corp generally do not qualify. The taxpayer or the property may be located

outside Iowa. Statistics Iowa had under 2 million individual income taxpayers annually during this time.

Total Iowa taxable income was about $40-100 billion annually during this time. Sources: A Brief Overview of the Iowa Capital Gain Deduction (July 2015), by Matthew Grygo; A Summary of the IA 100 from Tax Year 2015, by Shen Chen. Sources: A Brief Overview of the Iowa Capital Gain Deduction (July 2015), by Matthew Grygo;

A Summary of the IA 100 from Tax Year 2015, by Shen Chen. Sources: A Brief Overview of the Iowa Capital Gain Deduction (July 2015), by Matthew Grygo; A Summary of the IA 100 from Tax Year 2015, by Shen Chen. IA 100 Form Series

Form IA 100 Beginning with TY2015, the taxpayer must file an IA 100 form whenever claiming the Iowa capital gain deduction. The goal of the IA 100 is to increase the reporting of information when claiming the deduction, and to decrease the need for the

taxpayer to provide additional information months or years after the sale. IA 100 Stakeholder Group After the TY2015 filing deadline, the Department met with other stakeholders, including tax preparers and software developers, to review

issues related to the IA 100. The Department revised the IA 100 for TY2016 to address many of the concerns expressed by the other stakeholders, legislators, and taxpayers. IA 100 Form Changes - 2016 The goal of the IA 100 form series continues to be

providing information up-front, rather than months or years after the return is filed. The revised 2016 IA 100 series generally requires less information than the 2015 form. The 2016 IA 100 series no longer requests certain information up-front that required much effort for taxpayers to collect, although the Department may

later require this information for review. IA 100 Form Changes - 2016 The 2016 IA 100 is now a series of forms:

IA 100A Cattle, Horses, or Breeding Livestock IA 100B Real Property Used in a Farm Business IA 100C Real Property Used in a Non-Farm Business

IA 100D Timber IA 100E Business IA 100F Employer Securities to a Qualified Iowa Employee Stock Ownership Plan IA 100 Form Changes - 2016 Dividing the IA 100 into a series of forms allows each

form to focus on the specific property-type sold. The forms in the 2016 IA 100 series remove certain questions and reword other questions based on the property sold. The forms in the 2016 IA 100 series span one page to three pages (compared to six pages for the 2015 IA 100).

2016 IA 100 Installment Sales All payments from an installment sale may qualify for the capital gain deduction. Eligibility is determined at the time of the sale. Example: A farmer sells farmland in 2010. The sale requires annual installment payments through

2020. If the farmer satisfied the holding period and material participation requirements at the time of the sale in 2010, all future installment payments qualify for deduction. 2016 IA 100 Installment Sales It is important for taxpayers to continue reviewing and

filing an IA 100 form whenever they claim the capital gain deduction, including every year of an installment sale. The 2016 IA 100 has been simplified for all users, including those reporting gains from an installment sale. For example, users no longer need to report the total property sales price or the total property basis when

reporting the gain from an installment sale. Form IA 100A Cattle, Horses, or Breeding Livestock Form IA 100A Cattle, Horses, or Breeding Livestock

Form IA 100A Cattle, Horses, or Breeding Livestock Form IA 100A Cattle, Horses, or Breeding Livestock Horses and cattle must be held for at least 24 months

and for breeding, dairy, draft, or sporting purposes. Other livestock must be held for at least 12 months and for breeding purposes. Other livestock includes hogs, mules, donkeys, sheep, goats, fur-bearing mammals, and other mammals. Other livestock does not include poultry, chickens, turkeys, pigeons, geese, other birds, fish, frogs, or

reptiles. Form IA 100B Real Property Used in a Farm Business Form IA 100B Real Property Used in a Farm Business

Form IA 100B Real Property Used in a Farm Business Form IA 100B Real Property Used in a Farm Business

Form IA 100B Real Property Used in a Farm Business Cash-rent farm landlord is generally not a material participant. Crop-share farm landlord is generally a material participant if the landlord participated in managing the farm operation.

Crop share landlord usually must pay selfemployment tax on crop-share income. Taxpayer must prove a crop-share arrangement existed. Form IA 100B Real Property Used in a Farm Business CRP income is income from farm operations.

CRP income is usually subject to selfemployment tax. Taxpayer materially participates in the CRP by seeding, mowing, and planting the farmland or by overseeing these activities. Form IA 100C Real Property Used in a NonFarm Business

Form IA 100C Real Property Used in a NonFarm Business Form IA 100C Real Property Used in a NonFarm Business Form IA 100C Real Property Used in a NonFarm Business Form IA 100C Real Property Used in a NonFarm Business

Both spouses activities in the business count towards material participation. Activities of other persons are not attributed to the taxpayer. Investor-type activities do not count towards material participation. In a like-kind exchange or involuntary conversion,

material participation relates back to the property relinquished. Form IA 100C Real Property Used in a NonFarm Business Material Participation Test 1: 500 hours. Taxpayer participates in the business more than 500 hours in the tax year.

Requires less than 10 hours per week. Example: Taxpayers main business. Form IA 100C Real Property Used in a NonFarm Business Material Participation Test 2: Substantially all participation. Taxpayers participation is substantially all

participation of all persons in the business. Generally doesnt apply if any other person participates in the business. Example: Taxpayer owns a very small business with no employees. Form IA 100C Real Property Used in a NonFarm Business

Material Participation Test 3: More than 100 hours, and no one participates more. Consider participation of all employees, contractors, etc. Taxpayers must prove their participation and participation of all other persons. All doubts are resolved in favor of taxation.

Example: Taxpayer owns a small business with few employees. Form IA 100C Real Property Used in a NonFarm Business Material Participation Test 4: Aggregate participation. Taxpayer participates in multiple businesses, excluding rentals, for more than 100 hours in the

year, and the total participation is more than 500 hours in the year. Businesses relied upon cannot satisfy any other test. Example: Taxpayer owns multiple businesses, and participates in each business for 101 to 500 hours during the year.

Form IA 100C Real Property Used in a NonFarm Business Material Participation Test 5: Five of the prior ten years. Taxpayer satisfies any of tests 1 to 4 for five of the prior ten years. Taxpayer must satisfy this test for each year claimed.

Example: Taxpayer retires from a business with material participation, and then sells it less than five years later. Form IA 100C Real Property Used in a NonFarm Business Material Participation Test 6: Material participant for life Taxpayer who materially participates in a personal service

activity for any three years is a material participant for life. Personal service activity includes personal services in health, law, engineering, architecture, accounting, or any business in which capital is not a material incomeproducing factor. Example: Accountants, doctors, lawyers, etc. who own their practice and retire several years before selling the practice.

Form IA 100C Real Property Used in a NonFarm Business Material Participation Test 7: All facts and circumstances Taxpayer participates in the business more than 100 hours in the year and, based on all facts and circumstances, participation was regular, continuous, and substantial. Example: Taxpayer owns a business and is uniquely essential to its

success, but not does not qualify under any other test. Example: [These] are complex businesses that Mr. Wade built from the ground up and in which he continued to play a vital role. He was not merely a detached investor Mr. Wade brought something to [the businesses] that no one else could have, and they could not have continued to operate without his contacts and expertise. Wade v. C.I.R., T.C. Memo. 2014-169 (2014).

Form IA 100D Timber Form IA 100D Timber Form IA 100D Timber Taxpayer must treat the action as a sale or

exchange of timber for federal purposes. Taxpayer may own cut timber, standing timber, or a contract to cut standing timber. Timber includes cut or standing trees usable for lumber, ornamentation, or other wood products.

Form IA 100E Business Form IA 100E Business Form IA 100E Business Form IA 100E Business

Form IA 100E Business Form IA 100E Business The deduction is tied to the sale of a business, and not just the sale of business assets. Sale of a business means the sale of at least 90% of

the fair market value of the tangible personal property and service of the business. Service of the business includes goodwill, going concern value, patents, client lists, and trademarks. It does not include receivables, cash, and inventory. The sale of part of a business generally does not qualify for the deduction.

Form IA 100F ESOP Form IA 100F ESOP Form IA 100F ESOP 50% deduction only.

No holding or material participation requirements. Securities sold must be from an Iowa corporation. The ESOP must be established by an Iowa corporation for the benefit of the employees of that corporation.

Resources Iowa Tax Forms Online https://tax.iowa.gov

60 Receive Automatic Updates Subscribe to the Following Topics

Newsroom Tax Information

eFile & Pay Information Sign-up for Due Date Reminders Economic, Fiscal, & Statistical Information Electronic Filing NOTE: These replace the eLists formerly used

Follow Us on Twitter @IDRBusinessTax @IDRIncomeTax @IDRTaxPros Like Us on Facebook

www.facebook.com/iowadepartmentofrevenue Purpose of this Presentation This presentation is intended for general educational purposes only. Anyone involved in an audit or protest

must contact the Department representative they are working with on that issue. What Questions Do You Have?

THANK YOU!!

Recently Viewed Presentations

  • Chapter 8 Early Civilizations in Africa

    Chapter 8 Early Civilizations in Africa

    8 Early Civilizations in Africa ... States of West Africa Expansion of Islam has impact on political system Introduction of Arabic for a writing system Ghana Majority of people were farmers Primary reason for Ghana's growth was gold Trans-Saharan trade...
  • Ion Exchange Laboratory - Santa Monica College

    Ion Exchange Laboratory - Santa Monica College

    Protein Purification by Ion Exchange Chromatography Column Chromatography Ion Exchange Chromatography Uses a solid matrix with either a positive or negative charge Separation is based on an equilibrium of the molecules adsorbed to the exchanger versus the elution solvent Changing...
  • Kiwi-Wコンソーシアム設立説明会

    Kiwi-Wコンソーシアム設立説明会

    Times New Roman MS Pゴシック Symbol MS P明朝 Lock And Key Microsoft Photo Editor 3.0 イメージ Kiwi-W consortium establishment briefing Prehistory of Kiwi format (1) Prehistory of Kiwi format (2) Conventional map database structure Data base structure of Kiwi format...
  • Project Northland I Cheryl Perry etal. Multi-level, multi-year

    Project Northland I Cheryl Perry etal. Multi-level, multi-year

    Project Northland I Cheryl Perry etal. Multi-level, multi-year community-wide alcohol prevention program in Minnesota 1991 (sixth graders)- 1998 (graduate) Multi-level Curricula x 3 years Peer leadership Parental education Task forces Sixth Grade: Slick Tracy Home Team Program Slick Tracy/Breathtest Mahoney...
  • Multimedia in Libraries (and in the Columbia Libraries)

    Multimedia in Libraries (and in the Columbia Libraries)

    Multimedia in Libraries (and in the Columbia Libraries) Madeleine Fix-Hansen Digital Multimedia Assistant Columbia University Libraries Define: Multimedia in Libraries A loose definition: Using audio recordings, screencast tutorials, digital images/graphic design and digital video to present library content in the...
  • Dr. Seuss Goes to War - barren.k12.ky.us

    Dr. Seuss Goes to War - barren.k12.ky.us

    Dr. Seuss Goes to War. The World War II Editorial Cartoons of Theodore Seuss Geisel. Richard H. Minear
  • Dissemination Webinar on Planning for a Demonstration Project

    Dissemination Webinar on Planning for a Demonstration Project

    1General Planning for the Installation of 5Kw Submersible Turbine. Upper Jehlum Canal running Period= 11 months . Annual Planned Shutdown = 5th January - 5thFebruary. Planned schedule of activities for the Installation of this turbine at Jaggu water Level Crossing...
  • Background: DRAM Refresh - ETH Z

    Background: DRAM Refresh - ETH Z

    Carnegie Mellon University. Presented by Robin Burkhard. 14 November 2018. Background, Problem & Goal. Background: DRAM Refresh. DRAM cells leak over time. Rows need to be refreshed periodically. Cells have different retention times. Refresh each row every 64 ms.