Read that there is a exclusion for some capital gains. TP had farmed, now for several years has rented out his hog bldgs for cash rent. He sold these bldgs and land, would that be eligible for the exclusion? TP also inherited farm land and it was sold, it had been farmed for over 10 years, but not by TP, by TP's father. Just hoping to get a break, and don't want to miss something. Any IA help would be appreciated.
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Iowa Capital Gains Deduction
Might be able to help on the second part of your post. We had a similar situation turn up a few months ago: Client inherited farm land in IA (client's father farmed, but the client lived in another state and was in another occupation); the client then sold the farm land, and was subject to capital gains.
The Iowa Capital Gains Deduction applies to capital gains on the sale of business assets that meet two 10-year requirements:
1) a ten-year holding period, and
2) the taxpayer has materially participated in the business for the last ten years.
"Hold" is defined as ownership by the taxpayer. The holding period appears to be applicable only to the taxpayer (your client) and cannot be tacked on the the holding periods of prior owners even if transferred by inheritance.
"Material participation" is defined as involvement in the operation of the business on a regular, continuous, and substantial basis.
Our client did not meet either of the requirements for the IA Capital Gains Deduction, so we determined that he was not eligible to take that deduction on the IA state return. -
I was hopeful that maybe inheritance might be ok, but reading the enhanced instructions, it didn't sound like it. My TP was involved in his hog operation until he moved, but still receives rent and hog operation was still going on. 4835 has been filed which says no material participation. But there is a nonfarm capital gain exclusion, isn't there? Anyway I might be able to use that? Just trying to cover all my bases to help my client. Not being familiar with IA, I'm asking for guidance.Comment
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