|
Posted by Katie on November 15, 2006, 10:05 pm
Please log in for more thread options Ted wrote:
>> Ted wrote:
>>> I owned stock in a small company that is no longer. When I
>>> invested, NYS was kind enough to give a 20% tax credit.
>>>
>>> Is my basis what I invested, or 80% of what I invested?
>>> If I recall correctly, the tax credit was treated as income
>>> for the Federal Tax return, so I don't see why it should
>>> reduce my loss now; but you never know...
>> I'm assuming this was the credit for capital contributions
>> to emerging technology companies (NYTL Sec. 606(r)).
>>
>> The credit provision doesn't require you to reduce your
>> basis in the stock, but it does recapture the credit to the
>> extent you held the stock less than 108 months (9 years)
>> after the close of the tax year in which you acquired the
>> stock. The recapture is proportionate to the time the stock
>> was held.
>>
>> In general, state tax credits are not taxable income for
>> federal income tax purposes. While the basis of property
>> that is eligible for certain federal credits is reduced by
>> the amount of the credit, those reductions are not effective
>> for state income tax purposes. Similarly, tax credits
>> allowed by states may reduce the basis of the property for
>> state income tax purposes, but do not affect the federal
>> basis. I don't know why the credit would have been included
>> in your federal taxable income in the year you purchased the
>> stock, but whether it was or not, I don't believe it has any
>> effect on your basis in the stock for federal purposes.
> That is correct, a QETC.
> So you are telling me it reduces the basis for my NYS
> return, but not for my Federal return; right?
>
> The company only lasted 6 years. Do I lose part of the
> credit? Doesn't seem fair, since I never sold it; but the
> law isn't always fair.
>
> I will have to look up my old tax return, maybe my
> recollection is wrong.
No, it isn't a basis reduction for NYS purposes; it's a
partial recapture of the credit. In other words, you'd
calculate the Schedule D loss the same as federal, but you'd
have an ordinary income addition in the amount of the
recaptured credit.
However, if you still own the stock, and are just writing it
off because it has become worthless, I'm not sure the credit
recapture applies. I'd have to look into that a little
farther.
Katie in San Diego
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap