Home      Login


The Sale of State Tax Credits  


Author:  Erik M.  Jensen.


Source: Volume 28, Number 04, Summer 2011 , pp.91-96(6)




Journal of Taxation of Investments

next article > |return to table of contents

Abstract: 

In Tempel v. Commissioner , the Tax Court came to a number of important conclusions about sales of state income tax credits that occurred shortly after the credits had been received. The gain was held to be capital gain (with the court implicitly concluding that the credits were property), but the holding period for the credits began at receipt and the taxpayers had no basis in the credits. The bottom line was that the gain was short-term capital gain,with no basis offset, a negative result for these taxpayers. But the Tax Court’s conclusion that the credits were capital assets creates planning opportunities for others.

Keywords: Tempel v. Comm’r; Virginia Historic Tax Credit Fund 2001 LP v. Comm’r; state income tax credit; income tax credits as capital assets; holding period; basis; relinquishment of contract rights; substitute-for-ordinary-income test

Affiliations:  1: Case Western Reserve University School of Law.

Subscribers click here to open full text in PDF.
Non-subscribers click here to purchase this article. $20

next article > |return to table of contents