Search Rules

Deadline For Public Comment

Deadline: Jan 21, 2014

The deadline for public comment has expired. Contact the agency or primary contact person listed below for assistance.

Rule Details

Rule Number: 13P046
Title: Capital Gains Exclusion
Type: Standard
Status: Adopted
Agency: Department of Taxes; Agency of Administration
Legal Authority: 32 V.S.A. § 3201(a)(1) and 3 V.S.A. § 801(b)(11)
Summary: Certain capital gain income is exempted from the Vermont individual income tax. A taxpayer may exclude the greater of (1) the first $5000 of adjusted net capital gain income or (2) 40 percent of adjusted net capital gain income from the sale of assets held more than 3 years. However, residential real estate, most depreciable personal property and publicly traded stocks and bonds do not qualify for the exemption. This rule explains the term "adjusted net capital gain income"; the scope of the 40 percent exemption; the treatment of asset sales versus (non-public) stock sales; how the exclusion flows to pass-through entities; that Vermont follows federal law with respect to basis, holding period and the characterization of a sale; and filing requirements.
Persons Affected: Taxpayers with adjusted net capital gain income and their tax preparers.
Economic Impact: The rule provides certainty regarding consequences of sales of small businesses structured as limited liability companies (LLC) or partnerships, providing that adjusted net capital gain from the sale of a membership interest (LLC) or a partnership interest is eligible for exclusion as long as those interests are not publicly traded. This puts these entity forms on the same footing as closely held corporations, which are addressed directly in statute. The rule also provides certainty with respect to treatment of gain from the sale of a single-member pass-through entity. Federal law disregards these entities (which results in significant tax advantages to the owner) and treats the assets as belonging to the owner. Consequently, the rule also treats this as an asset sale; and eligibility for the 40 percent exclusion depends upon the nature of the asset in accordance with the statutory categories. The rule also expressly incorporates federal law with respect to personal use of investment real estate.
Posting date: Dec 11,2013

Hearing Information

Information for Hearing # 1
Hearing date:
01-14-2014 10:00 AM   
Location: First Floor Conference Room # 120
Address: 133 State Street
City: Montpelier
State: VT
Zip: 05601
Hearing Notes:

Contact Information

Information for Contact # 1
Level: Primary    
Name: Molly Bachman    
Agency: Department of Taxes; Agency of Administration    
Address: 133 State Street    
City: Montpelier    
State: VT    
Zip: 05633-1401    
Telephone: 802-828-0212    
Fax: 802-828-5873    
Email: 
molly.bachman@state.vt.us
     
 
   
Website Address:  http://www.state.vt.us/tax/index.shtml
     
 
   
Information for Contact # 2
Level: Secondary    
Name: Jeffrey Dooley    
Agency: Department of Taxes; Agency of Administration    
Address: 133 State Street    
City: Montpelier    
State: VT    
Zip: 05633-1401    
Telephone: 802-828-5365    
Fax: 802-828-2701    
Email: 
jeffrey.dooley@state.vt.us
     
 
   
       

Keyword Information

Keywords:

capital gains
capital gains exclusion
income tax
taxable income
adjusted net capital gain income
A Vermont Government Website   Copyright 2014 State of Vermont