Question

Virginia disallowed long term capital gains subtraction

Forum|Forum|7 years ago
June 6, 2019
3 replies
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I owned Rental property in Florida for 2-1/2 years. I received a notice stating this is disallowed and owe the tax plus accrued interest. I trusted TurboTax to file this correctly. What went wrong?

TurboTax Premier Online

Critter

Employee

Were you a full year resident of VA that year ? If so you may have read the screen instructions incorrectly since you are not allowed a subtraction for that income item even though it was earned in another state. Instead you would have gotten a credit for the taxes paid to the other state on the duplicated income ... however since FL doesn't have an income tax you would get no credit.

Hal_Al

Employee

deleted

Hal_Al

Employee

Rental property does not qualify for the VA capital gains exclusion. That is for the sale of certain small businesses. What "went wrong" was you answered yes (in the Turbotax interview) when asked if you qualified for this deduction.

If you disagree, The TurboTax (TT) accuracy guarantee process is explained here

https://ttlc.intuit.com/questions/1901269-how-do-i-submit-a-claim-under-the-turbotax-100-accurate-ca....

but it only covers actual CALCULATION errors in the program, not user error (and it’s almost always user error), and it only pays any penalties or interest resulting from that error, not the taxes. Either way, you are still responsible for the increase in tax.

Hal_Al

Employee

From the instructions for form 763:
Code 52. Certain Long-Term Capital Gains
Provided the long-term capital gain or investment services
partnership income is attributable to an investment in a
“qualified business” as defined in Va. Code § 58.1-339.4 or
any other technology business approved by the Secretary of
Technology, it may be allowed as a subtraction. The business
must have its principal facility in Virginia and less than $3
million in annual revenues for the fiscal year preceding the
investment. The investment must be made between the dates
of April 1, 2010, and June 30, 2020. Taxpayers claiming
the Qualified Equity and Subordinated Debt Credit cannot
claim this subtraction relating to investments in the same
business. In addition, no investment is “qualified” for this
deduction if the business performs research in Virginia on
human embryonic stem cells.

Reference: <a rel="nofollow" target="_blank" href="https://www.tax.virginia.gov/sites/default/files/2017-01/763-2016-instructions.pdf">https://www.tax.virginia.gov/sites/default/files/2017-01/763-2016-instructions.pdf</a>