Nebraska Administrative Code
Topic - REVENUE, DEPARTMENT OF
Title 316 - NEBRASKA DEPARTMENT OF REVENUE
Chapter 22 - INDIVIDUAL INCOME TAX REGULATIONS
Section 316-22-020 - SPECIAL CAPITAL GAINS

Universal Citation: 316 NE Admin Rules and Regs ch 22 ยง 020

Current through March 20, 2024

020.01 Any resident individual may make an election to subtract from federal adjusted gross income the capital gain from the sale of stock which meets the following conditions:

020.01A The stock must be the stock of a qualified corporation;

020.01B The stock must have been acquired by the individual while employed or on account of employment by the qualified corporation; and

020.01C The individual has not previously made an election for stock of a different qualified corporation.

020.02 A qualified corporation is a corporation which, at the time of the first sale or exchange for which the election was made, was in existence and actively doing business in Nebraska for at least three years and had at least five shareholders and at least two groups of unrelated shareholders, with not more than ninety percent of the stock being held by a single related group of shareholders.

020.02A A qualified corporation includes a predecessor or successor corporation which was a party to a reorganization during or after the employment of the person making the election and which reorganization was entirely or substantially tax free.

020.02B A qualified corporation includes a member of a unitary group of corporations if any member of the unitary group meets the conditions listed in Reg-020.02 above.

020.02C Two shareholders are considered to be related when one shareholder owns stock, either directly or indirectly, which if owned directly would be attributed to the other person under Internal Revenue Code section 318. In addition, the shareholders are related if one is the brother, sister, aunt, uncle, cousin, niece, or nephew of the other person who owns capital stock either directly or indirectly.
020.02C(1) Two shareholders who are otherwise unrelated are considered related if they are each related to the same person.

020.03 An employee of a corporation is a person who is paid wages or other payments which are subject to withholding under the Internal Revenue Code and are payments made by employers to employees.

020.04 If a person who has acquired stock of a qualified corporation while an employee of the corporation has died without making an election, the surviving spouse or the oldest surviving issue, if there is no surviving spouse, may make an election for such stock.

020.05 After an election has been made, the following persons and entities may subtract the capital gains from the sale of qualifying stock from federal adjusted gross income:

020.05A The employee,

020.05B The spouse and issue of the employee to the extent the capital gain is from the sale or exchange of stock received from the employee through an intervivos gift, and

020.05C A trust which received the stock from the employee in an intervivos transfer for the benefit of the employee's spouse or issue.

020.06 Capital gains from the sale of stock which has been received by the spouse or issue of the employee through inheritance or which was sold by a testamentary trust does not qualify.

020.07 The amount of capital gain subtracted from federal adjusted gross income cannot exceed the amount of capital gain reported on the taxpayer's income tax return by more than three thousand dollars ($3, 000.00 ) or one thousand five hundred dollars ($1, 500.00 ) if a married filing separate return is filed. On a joint return, if both spouses have capital gains which qualify as special capital gains, the total amount of capital gains subtracted by both spouses cannot exceed the total capital gains reported on their joint return by more than three thousand dollars ($3, 000.00 ).

020.07A To the extent that the capital gain attributable to the sale of qualified stock cannot be subtracted because of the limitation provided in Reg-22-020.07, the excess can be carried forward to the next succeeding year and used to the extent that it does not exceed the limitation found in Reg-22-020.07. Any remaining excess can be carried forward until it has been used.

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