Section 701.59.27. Net gains and losses from the sale of assets.

For purposes of administration of this rule, a capital gain or loss shall mean the sale price or value at the time of disposal of an asset less the adjusted basis, whether reportable as short-term or long-term capital gain or ordinary income for federal income tax purposes.

       59.27(1) Gain or loss from the sale, exchange, or other disposition of real or tangible or intangible personal property, if the property while owned by the taxpayer was used in the taxpayer’s trade or business, shall be apportioned by the business activity ratio applicable to the year the gain or loss is reported on the federal income tax return and may at the taxpayer’s election be included in the computation of the business activity ratio as follows:

        a.           Gain from the sale, exchange, or other disposition of real property shall be included in the numerator if the property is located in this state.

        b.           Gain from the sale, exchange, or other disposition of tangible personal property shall be included in the numerator if:

       (1)             The property has a situs in this state at the time of sale; or

       (2)             The taxpayer’s commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs.

        c.           Gains from the sale, exchange, or other disposition of intangible personal property shall be included in the numerator if the taxpayer’s commercial domicile is in this state.

        d.           All gains shall be included in the denominator of the activity ratio.

A taxpayer cannot elect to exclude or include gains or loss from the sale of assets where the election would result in an understatement of income reasonably attributable to Iowa. Noninclusive examples of gains or loss from the sale, exchange or other disposition of real or tangible or intangible property which may not be included in the computation of the business activity ratio because to do so would result in an understatement of net income reasonably attributable to Iowa are the gain recognized under an election pursuant to Section 338 of the Internal Revenue Code or gain recognized under Section 631(a) of the Internal Revenue Code.

       59.27(2) Gain or loss from the sale, exchange, or other disposition of property not used in the taxpayer’s trade or business shall be allocated as follows:

        a.           Gains or losses from the sale, exchange, or other disposition of real property located in this state are allocable to this state.

        b.           Gains or losses from the sale, exchange, or other disposition of tangible personal property are allocable to this state if:

       (1)             The property has a situs in this state at the time of sale; or

       (2)             The taxpayer’s commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs.

        c.           Gains or losses from the sale, exchange, or other disposition of intangible personal property are allocable to this state if the taxpayer’s commercial domicile is in this state.

This rule is intended to implement Iowa Code section 422.63.