Tax Type
Corporation Income Tax
Description
Transitional modifications
Topic
Subtractions and Exclusions
Date Issued
09-13-1985
September 13, 1985
RE: §58.1-1821 Application: Corporation Income Tax
Dear ****
This is in response to your letter of April 8, 1985, protesting the assessment of additional tax for 1983. The assessment resulted from an office audit which disallowed a subtraction claimed for previously taxed income identified as "excess of Virginia basis over federal basis for land sold...
Based upon information and copies of 1966 Virginia and federal returns submitted with your letter, it appears that the amount in issue is gain on the sale of land acquired in 1966 in a tax free exchange under I.R.C. §1031. Under federal law, gain realized on the exchange is deferred until the acquired land is sold, and the acquired land has the same basis as the land exchanged.
In 1966, Virginia income tax law did not allow similar tax free exchanges. Therefore, the taxpayer reported the amount in issue as gain in its 1966 Virginia return and paid tax upon it.
Paragraph 1. of Virginia Code §58.1-315 allows a subtraction for income or gain properly included in income or gain under Virginia income tax law prior to 1972. The amount in issue qualifies for the subtraction and the assessment of additional tax was erroneous. Accordingly, the additional tax and interest will be abated.
Sincerely,
W. H. Forst
Tax Commissioner
RE: §58.1-1821 Application: Corporation Income Tax
-
- §58.1-315 Transitional Modification
Dear ****
This is in response to your letter of April 8, 1985, protesting the assessment of additional tax for 1983. The assessment resulted from an office audit which disallowed a subtraction claimed for previously taxed income identified as "excess of Virginia basis over federal basis for land sold...
Based upon information and copies of 1966 Virginia and federal returns submitted with your letter, it appears that the amount in issue is gain on the sale of land acquired in 1966 in a tax free exchange under I.R.C. §1031. Under federal law, gain realized on the exchange is deferred until the acquired land is sold, and the acquired land has the same basis as the land exchanged.
In 1966, Virginia income tax law did not allow similar tax free exchanges. Therefore, the taxpayer reported the amount in issue as gain in its 1966 Virginia return and paid tax upon it.
Paragraph 1. of Virginia Code §58.1-315 allows a subtraction for income or gain properly included in income or gain under Virginia income tax law prior to 1972. The amount in issue qualifies for the subtraction and the assessment of additional tax was erroneous. Accordingly, the additional tax and interest will be abated.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner