Iowa Capital Gain Deduction

The various types of sales resulting in capital gain have specific guidelines which must be met to qualify for the Iowa capital gain deduction. The following is a resource to outline these basic qualifications and should be used in conjunction with the IA 100 Capital Gain Deduction (41-161). Links to the Iowa Administrative Code and Internal Revenue Code are provided for details and definitions. Due to the complexity of the Iowa capital gain deduction and the limitations encountered in responding to all possible tax scenarios, the following flow charts are presented only as a guide. The current statutes, rules, and regulations are legally controlling.

You must complete the applicable IA 100 form to make a claim to the Iowa capital gain deduction on your return. Should the Department request it, the information on the IA 100 will be needed to verify whether you qualify for the deduction. Other information, in addition to that shown on the checklist, may also be required in some situations.

Do You Have A Qualifying Iowa Capital Gain Deduction?

If line 6 of the IA 1040 includes a capital gain transaction, you may have a qualifying Iowa capital gain deduction. The Iowa capital gain deduction is subject to review by the Iowa Department of Revenue and must be reported on an Iowa Capital Gain Deduction IA 100 form. Before you complete the applicable Iowa Capital Gain Deduction IA 100 form, review the Iowa Capital Gain Deduction Information Guide (41-161). Other information, in addition to that identified on the Iowa Capital Gain Deduction Information Guide and the applicable IA 100A-100F forms and instructions, may be required in some situations.

Use the following flowcharts to assist you in completing the applicable IA 100 form(s) and determining whether you have a qualifying Iowa capital gain deduction. These flowcharts are for personal use and should not be submitted to the Department.

IAC – Iowa Administrative Code       IRC – Internal Revenue Code        IRS – Internal Revenue Service

Miscellaneous Transactions

Miscellaneous Transactions Flowchart

• IAC 701—302.38(1)
  IAC 701—302.38(2)
  IAC 701—302.38(3)
  IAC 701—302.38(7)
  IAC 701—302.38(8)
  IAC 701—302.38(9)

Breeding Stock Other Than Cattle and Horses

Breeding Stock Other Than Cattle and Horses Flowchart

• IRC section 1231
  IAC 701—302.38(4)
  IAC 701—302.38(5)

Cattle and Horses Used For Breeding Draft, Dairy or Sporting Purposes

Cattle & Horses Used for Breeding Draft, Dairy or Sporting Purposes Flowchart

• IRC section 1231
  IAC 701—302.38(4)

Sales of Business Assets

Sales of Business Assets Flowchart

• IRC section 331
  IRC section 338
  IRC section 469(h)
  IRC section 1223 
  IRS Reg. I.469-5 and 5T
  IAC 701—302.38(1)
  IAC 701—302.38(3)
  IAC 701—302.38(7)
  IAC 701—302.38(8)

Real Property Used in a Non-Farm Business

Real Property Used in a Non-Farm Business Flowchart

• IRC section 469(h)
  IRC section 1223
  IRS Reg. I.469-5 and 5T
  IAC 701—302.38(1)
  IAC 701—302.38(2)
  IAC 701—302.38(7)
  IAC 701—302.38(8)

Real Property Used in a Farming Business

Real Property Used in a Farming Business Flowchart

• IRC section 469(h)
  IRC section 1223
  IRC Section 2032A
  IRS Reg. I.469-5 and 5T
  IAC 701—302.38(1)
  IAC 701—302.38(2)
  IAC 701—302.38(7)
  IAC 701—302.38(8)

Timber

Timber Flowchart

• IRC section 1231
  IRC section 1.631-1 
  IRC section 1.631-2
  IAC 701—302.38(6)
  IAC 701—302.38(7)
  IAC 701—302.38(8)

Sale of Securities to an Iowa Employee Stock Ownership Plan (ESOP)

Sale of Securities to an Iowa ESOP Flowchart

• IAC 701—302.38(10)