Current through Register Vol. 50, No. 9, September 20, 2024
A. General.
R.S.
47:293(9)(a)(xvii) and (10)
provide a deduction for resident individuals and nonresident individuals
("taxpayers"), respectively, for net capital gains resulting from the sale or
exchange of an equity interest in, or from the sale or exchange of
substantially all of the assets of a non-publicly traded corporation,
partnership, limited liability company, or other business organization
("business") commercially domiciled in Louisiana.
B. Definitions
Capital Gains from the Sale or Exchange of the Assets
of a Business-capital gains from sales and exchanges that are reported
on Federal Form 4797-Sales of Business Property, the gains from which are
reportable on Schedule D of Federal Form 1040.
Commercial Domicile-the principle place from
which the business is directed or managed.
Equity Interest-an ownership interest in a
business entity that is not publicly traded, such as stock in a corporation, a
partnership interest in a partnership, or a membership interest in a limited
liability company.
Net Capital Gains-the amount reported as
capital gains on the Federal Form 1040.
Related Party-
a. a taxpayer and all entities which are
controlled entities with respect to such taxpayer;
b. a taxpayer and any trust in which such
taxpayer (or his spouse) is a beneficiary, unless such beneficiary's interest
in the trust is five percent or less of the value of the trust property;
and
c. except in the case of a sale
or exchange in satisfaction of a pecuniary bequest, a taxpayer who is an
executor of an estate and a beneficiary of such estate.
Sale or Exchange of an Equity Interest-a
sale or exchange of an equity interest that is reportable on Schedule D of
Federal Form 1040-Capital Gains and Losses.
Sale or Exchange of Substantially All of the Assets
of a Business-a sale or exchange of assets that leaves the entity
unable to carry-on its business. A sale or exchange of assets is presumed to be
a sale or exchange of substantially all of the assets of the business if the
selling business transfers at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of the gross assets
that it held immediately before the transfer.
C. Documentation Requirements
1. Taxpayers claiming the deduction shall
submit the following documentation at the time of filing their Louisiana
individual income tax return claiming the deduction:
a. a completed Louisiana Form R-6180, Net
Capital Gains Deduction Worksheet;
b. documentary evidence of the date the
taxpayer acquired an equity interest in the business, such as articles of
incorporation or organization, acts of sale or exchange, or donative
instruments;
c. a copy of the
taxpayer's federal Schedule K-1, if applicable, from the entity from which the
gain was derived; and
d. a complete
copy of the taxpayer's Federal Form 1040 filed with the IRS for the period in
which the gain was recognized, including the Schedule D and any corresponding
schedules and forms.
2.
In addition to the documentation required by Paragraph 1 above, when the
capital gain for which a deduction is being claimed is greater than $250,000,
taxpayers shall also submit the following at the time of filing their Louisiana
individual income tax return claiming the deduction:
a. copies of the last two returns on which
the income from the business was reported. If the gain is derived from a
partnership, provide Form IT-565, Louisiana Partnership Return of Income, for
the last two years.
b. If the gain
is derived from a pass-through entity, provide detailed information on the
pass-through structure, such as a complete organizational chart showing each
tier between the taxpayer and the entity from which the gain is
derived.
c. If the gain is from the
sale of assets, the taxpayer shall also provide the following:
i. a depreciation schedule or fixed asset
schedule showing a calculation of gross to net asset values; and
ii. an allocation of purchase price among
assets as required by IRC Section 1060, and generally reportable on IRS Form
8594.
D. Eligibility Restrictions
1. Net capital gains resulting from the sale
or exchange of real property or tangible assets may qualify for the deduction
if 75 percent or more of the real property or tangible assets are located
within Louisiana, provided however, that the income from the related business
was subject to Louisiana income tax prior to the sale or exchange.
2. Net capital gains from the sale or
exchange of an equity interest or from the sale or exchange of substantially
all assets shall not qualify for the deduction if the transaction transfers
ownership of the interest or assets to a related party.
E. The accrual of refund interest shall be
suspended during any period of time that a delay in allowance or approval of
the deduction is attributable to the taxpayer's failure to provide information
or documentation required herein.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
47:293(9)(a)(xvii) and (10),
47:293.2 and 47:1511.
