41-157: IA 100C Capital Gain Deduction - Business Property 41-157 (2024)
Iowa · Iowa DOR · Used for tax years 2024
The 2024 IA 100C reports the Iowa capital gain deduction for real property used in a non-farm business. It records installment sale gains, property ownership details, and the taxpayer’s material participation in the business.
Who files this form
Use the 2024 IA 100C to claim an Iowa capital gain deduction for a qualifying installment sale of real property used in a non-farm business. The sale must have occurred before January 1, 2023.
- Include the completed form with your IA 1040. Complete a separate IA 100C for each distinct property sale.
- Complete the entire form each year of a qualifying installment sale.
- If spouses file separately, each spouse must complete a form for the deduction claimed based on that spouse’s ownership percentage.
The property must have been held for at least 10 years under IRC section 1223. You must also meet at least one of the seven material participation tests for each of the 10 years before the sale, or satisfy Test 6 for at least three years.
What you'll need
Have these records and details available to complete the form:
- Installment sale information: first installment date, expected final installment date, total capital gain over the sale’s life, deductions claimed in prior years, and capital gain received during 2024, excluding interest.
- Business and property details: legal and doing-business-as names, business activities, organization type, and the property’s address or legal description. For a legal description, also provide its general location in relation to a major road or town and the county.
- Ownership records: acquisition and sale dates supported by documentation, holding period, ownership percentage, how the property was acquired, and all owner and buyer names. If the gain passed through an entity, report all owners of that entity.
- Material participation records: documentation supporting the tests claimed and detailed descriptions of your duties and the years you performed them.
If claiming Test 4, include a separate statement explaining your activities and hours in all businesses claimed, excluding rental businesses. If claiming Test 7, include a separate statement explaining how you materially participated each year based on all facts and circumstances.
The Department may request additional information.
How to file
- Complete all parts of IA 100C for each distinct qualifying property sale.
- Enter the deduction in Part IV, line 5, using the capital gain amount from Part I, line 2e.
- Include the deduction on IA 1040 Schedule 1, line 16.
- Include the completed IA 100C with your IA 1040.
The supplied text does not provide a mailing address or e-filing directions.
Common mistakes
- Using this form for an ineligible sale. Stop if the sale occurred on or after January 1, 2023, or was not an installment sale. For a gain from a C corporation, stop if it was not recognized under IRC section 331 or 338.
- Including interest. Do not include interest received in the installment sale capital gain amounts.
- Reporting the tenant’s business instead of the rental business. Enter the lessor business that received rent, not the lessee business that paid it. Do not include the tenant’s activities in the business activity description. “Rental” is not a legal business organization type.
- Counting someone else’s work as your participation. Tenant-business participation does not count toward rental-business participation. In Part IV, line 4, do not include work performed by tenants, employees, or other people. For inherited property, the deceased owner’s activities before death do not count toward your participation.
- Claiming participation without supporting records. Your activities must be supported by records. Records prepared long after the activity generally cannot establish material participation. If none of the material participation tests apply, the sale is not eligible.
- Deducting amounts that are not eligible capital gain. The deduction applies to net capital gain. Nonrecaptured losses treated as ordinary income are not eligible.
Questions people ask
Do I need to complete the form again for each installment year?
Yes. Complete the entire form each year of a qualifying installment sale. Use a separate IA 100C for each distinct property sale.
How do married owners answer the sole-owner question?
If you file jointly and you and your spouse are the only owners, check “Yes” in Part III, line 3. If you file separately and both spouses are owners, check “No.” Each spouse must complete a separate IA 100C and report their own ownership percentage on line 4.
Can I qualify if I personally owned the property for less than 10 years?
The property must have a holding period of at least 10 years under IRC section 1223. The instructions explain that a like-kind exchange or involuntary conversion may allow the holding period of previously held property to count. If your ownership period is shorter, explain the difference in Part II, line 7.
Will the Department review my deduction?
The deduction is subject to review by the Iowa Department of Revenue. The Department uses IA 100C to verify eligibility and may request additional information.