REVENUE AND TAXATION
63-3022H. Deduction of capital gains. (1) If an individual taxpayer reports capital gain net income in determining taxable income, eighty percent (80%) in taxable year 2001 and sixty percent (60%) in taxable years thereafter of the capital gain net income from the sale or exchange of qualified property shall be a deduction in determining Idaho taxable income.
(2) The deduction provided in this section is limited to the amount of the capital gain net income from all property included in taxable income. Gains treated as ordinary income by the Internal Revenue Code do not qualify for the deduction allowed in this section. The deduction otherwise allowable under this section shall be reduced by the amount of any federal capital gains deduction relating to such property, but not below zero.
(3) Property held by an estate, trust, S corporation, partnership, limited liability company or an individual is "qualified property" under this section if the property had an Idaho situs at the time of sale and is:
(a) Real property held at least twelve (12) months;
(b) Tangible personal property used in Idaho for at least twelve (12) months by a revenue-producing enterprise;
(c) Cattle or horses held for breeding, draft, dairy or sporting purposes for at least twenty-four (24) months if more than one-half (1/2) of the taxpayer's gross income (as defined in section 61(a) of the Internal Revenue Code) for the taxable year is from farming or ranching operations in Idaho;
(d) Breeding livestock other than cattle or horses held at least twelve (12) months if more than one-half (1/2) of the taxpayer's gross income (as defined in section 61(a) of the Internal Revenue Code) for the taxable year is from farming or ranching operations in Idaho;
(e) Timber grown in Idaho and held at least twenty-four (24) months;
(f) In determining the period for which property subject to this section has been held by a taxpayer, the provisions of section 1223 of the Internal Revenue Code shall apply, except that the holding period shall not include the holding period of property given up in an exchange, when such property would not have constituted qualified property under this section without regard to meeting the holding period nor shall the holding period include any time period in which the property subject to this section was held by a corporation other than an S corporation. Notwithstanding the preceding sentence, the holding period of qualifying property that was distributed by an S corporation or an entity treated as a partnership to a person who was an owner, member or partner at the time of the distribution shall, for that person, include the amount of time that the S corporation or the entity held the property, regardless of whether the distribution was a liquidating distribution;
(g) When cattle, horses or breeding livestock were held and then sold by a pass-through entity, the requirement in paragraphs (c) and (d) of this subsection, that more than one-half (1/2) of the taxpayer's gross income for the taxable year be from farming or ranching operations in Idaho, shall apply to the activities of the pass-through entity. If more than one-half (1/2) of the pass-through entity's gross income for the taxable year was from farming or ranching operations in Idaho, and the other requirements of this section are satisfied, then the capital gains deduction is available to the individual owners of an interest in the pass-through entity on their distributive share of the proceeds from the cattle, horse or breeding livestock sale.
(4) As used in this section "revenue-producing enterprise" means:
(a) The production, assembly, fabrication, manufacture, or processing of any agricultural, mineral or manufactured product;
(b) The storage, warehousing, distribution, or sale at wholesale of any products of agriculture, mining or manufacturing;
(c) The feeding of livestock at a feedlot;
(d) The operation of laboratories or other facilities for scientific, agricultural, animal husbandry, or industrial research, development, or testing.
(5) As used in this section the term "real property" means land and includes the following:
(a) A "qualified conservation easement," as defined in section 2031(c)(8)(B) of the Internal Revenue Code, conveyed to a "Qualified Organization" as defined in section 170(h) of the Internal Revenue Code;
(b) Grazing permits or leases issued by the U.S. forest service, the bureau of land management or the Idaho department of lands, if such permit is transferred simultaneously with the transfer of the "base property"; and
(c) Any other property defined in section 1250(c) of the Internal Revenue Code as "section 1250 property" conveyed in perpetuity, the transfer of which would be required to be in writing by section 9-503, Idaho Code.
(6) Property that has been depreciated pursuant to section 1245 of the Internal Revenue Code is not eligible to be treated as real property for purposes of this deduction.
[63-3022H, added 1987, ch. 324, sec. 1, p. 680; am. 1994, ch. 39, sec. 2, p. 62; am. 1995, ch. 83, sec. 3, p. 244; am. 1995, ch. 111, sec. 15, p. 359; am. 1996, ch. 41, sec. 2, p. 111; am. 1997, ch. 56, sec. 1, p. 94; am. 1998, ch. 414, sec. 1, p. 1306; am. 2001, ch. 321, sec. 1, p. 1136; am. 2001, ch. 323, sec. 1, p. 1138; am. 2002, ch. 35, sec. 2, p. 68; am. 2005, ch. 208, sec. 1, p. 624; am. 2008, ch. 314, sec. 1, p. 873; am. 2010, ch. 5, sec. 1, p. 6; am. 2015, ch. 41, sec. 1, p. 93; am. 2015, ch. 70, sec. 1, p. 188; am. 2015, ch. 269, sec. 1, p. 1122.]