Winding Up

When the day is done for a business, Iowa may have a special break for taxpayers who have hung in there a long time.  A taxpayer has both owned and "materially participated" in a business for 10 years may have no Iowa tax on on the gain from the sale.  "May" is the key word here, as not every business sale qualifies.  There are a number of conditions you have to meet to qualify for the "ten and ten" exclusion. 

• You normally have to sell "substantially all" of the assets of the business to qualify for the exclusion (though it can apply to sales of real estate even if the rest of the business isn't sold).
• A sale of corporation stock or a partnership interest normally won't qualify (but sometimes proceeds of a corporate liquidation may).
• To determine whether you have "held" the business interest for ten years, you look to federal tax law holding period rules.
• To determine whether you have "materially participated" in the business for ten years, you look to the material participation rules in the federal "passive loss rules."
• Special rules apply to farmers.

As you may have guessed, these rules can be quite complex, so talk to your tax pro before you sell your business if you think you might qualify.

Speaking of winding up...

I understand IowaBiz.com will close up shop at the end of this month, so this is my last post here.  It's been awful nice of our friends at Professional Solutions Insurance Services to sponsor this blog and feed the bloggers once a month.  Thanks, guys!   Be sure to keep them in mind when covering your risks. 

Please stop by the regular sites of the IowaBiz bloggers; I post daily at www.taxupdateblog.com.  I hope to see you there.

Flickr image by jaycoxfilm.