2020 IA 100E 
                                                        Iowa Capital Gain Deduction - Business 
                                                                                    tax.iowa.gov 

Name(s) ___________________________________________  SSN ___________________________   

Part I: Sale of a Business 

1. Business name ________________________________________________________________
2. Business address ______________________________________________________________
3. Activity of the business __________________________________________________________
____________________________________________________________________________
4. Check the business organization type (check only one)
Partnership  ☐                         S Corporation  ☐
Sole Proprietorship  ☐                 C Corporation  ☐
LLC  ☐                                 Other  ☐(Explain  __________________________  )
5. Is the capital gain from the sale of capital stock or an ownership interest in the business?
No  ☐ ... Continue to Part I, line 7.
Yes   ☐... Continue to Part I, line 6. 

6. Was the sale treated as a sale or acquisition of assets for federal income tax purposes?
No  ☐ ... Sale is not eligible for Iowa capital gain deduction. Stop.
Yes   ☐... Continue to Part I, line 7. 

7. Ownership period
a. Date acquired ........................................... 7a. ______________ 
b. Date sold ................................................... 7b. ______________ 
8. Length of holding period ................................... Years 8a.  _________ Months 8b. ___________ 
9. If the taxpayer did not own the business for at least 10 years, explain how the taxpayer held the
business for at least 10 years under IRC section 1223.
___________________________________________________________________________
____________________________________________________________________________
10. Description of all the tangible personal property and service of the business (including intangible
assets) sold  __________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
11. Fair market value of the tangible personal property and service of the
business sold (including intangible assets) .................................................. 11. $ _____________ 
12. Total fair market value of all the tangible personal property and service
of the business (including intangible assets) ................................................ 12. $ _____________ 
13. Share of the business sold. Divide Part I, line 11 by Part I, line 12 and
enter percentage to three decimal places (for example 92.4%) ................... 13. ____________ %

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                                                                             2020 IA 100E, page 2 

14. Is Part I, line 13 at least 90.0%?
No  ☐ ... Sale is not eligible for Iowa capital gain deduction. Stop.
Yes   ☐... Continue to Part II, line 1. 

Part II: Details of Property Sold 

1. Is the capital gain from a C corporation?
No  ☐ ... Continue to Part II, line 3.
Yes   ☐... Continue to part II, line 2. 

2. Was the capital gain recognized under IRC 331 or IRC 338?
No  ☐ ... Sale is not eligible for Iowa capital gain deduction. Stop.
Yes   ☐... Continue to Part II, line 3. 

3. Are you the sole owner of this property? Married filers, see instructions.
No  ☐ ... Continue to Part II, line 4.
Yes   ☐... Enter 100% on Part II, line 4. 

4. Enter taxpayer’s ownership percentage of the total property sold to three
decimal places (for example 65.2%) ............................................................ 4. _____________ % 
5. Provide all other owner name(s) ____________________________________________________
 ______________________________________________________________________________
 ______________________________________________________________________________
6. How did the taxpayer acquire the property? (check all that apply)
Inheritance ☐                                   Like-kind (IRC 1031) Exchange ☐ 
Purchase   ☐                                    Involuntary Conversion ☐ 
Gift  ☐                                         Other  ☐(Explain: _________________________ 
Established/Founded ☐                           ________________________________________ )

7a. Provide all purchaser name(s)               7b. Purchaser’s relation to taxpayer (If unrelated 
                                                enter “None”) 
 __________________________________              ________________________________________ 
 __________________________________              ________________________________________ 
 __________________________________              ________________________________________ 
8. Is the capital gain from an installment sale?
No  ☐ ... Continue to Part III, line 1.
Yes   ☐... Enter the property installment sale information: 

a. Start date ........................................................ 8a.  _____________ 
b. End date ......................................................... 8b.  _____________ 
c. Total capital gain to be received by taxpayer
      over the life of the installment sale ................. 8c. $ ____________ 
d. Capital gain received by the taxpayer in tax year 2020 .................. 8d. $ _____________ 

Part III: Material Participation in a Business: 

1. Was this a sale of a business to a lineal descendant?
No  ☐ ... Continue to Part III line 2.
Yes   ☐... Continue to Part III, line 4.

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                                                                              2020 IA 100E, page 3 

2. Check the box for each applicable material participation test for which the taxpayer has
documentation. Check all that apply. If none of these apply, stop, the sale is not eligible for the
Iowa Capital Gain Deduction.
2a. Test 1: Taxpayer participated in the business for more than 500 hours in the year. .........  ☐

2b. Test 2: Taxpayer’s participation in the business constituted substantially all 
participation in the business in the year. ............................................................................  ☐

2c. Test 3: Taxpayer participated in the business more than 100 hours in the year, 
and no other person participated in the business more. ....................................................  ☐

2d. Test 4: Taxpayer participated in the business that sold the property and at least 
one other business, excluding rental businesses, in the tax year if, for each year claimed: 

    • Taxpayer participated in all such businesses more than 500 hours total; and
    • Taxpayer participated more than 100 hours in each such business; and
    • Taxpayer’s participation in each such business does not satisfy any other test. .......  ☐

2e. Test 5: Taxpayer materially participated in the business for five of the 10 years 
immediately prior to the year claimed. ...............................................................................  ☐

2f. Test 6: Taxpayer materially participated in a personal service activity for at 
least three years (may be outside the 10 years prior to the sale). .....................................  ☐

2g. Test 7: Taxpayer participated in the business more than 100 hours in the 
year and, based on all facts and circumstances, the participation was  
regular, continuous, and substantial. (see instructions) .....................................................  ☐

3. Describe in detail the daily, weekly, monthly, and annual duties of the taxpayer in the business
associated with this property during the 10 years immediately prior to the sale. Include the
years the taxpayer performed each duty. If the taxpayer was married during this period, include
duties performed by either spouse   _______________________________________________
  __________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
 ___________________________________________________________________________ 
4. Iowa capital gain deduction. If the taxpayer meets the holding period
qualifications and material participation qualifications, enter the taxpayer’s
amount of capital gain deduction here and include on IA 1040 line 23. ....... 4. $ ______________ 

                                                                                   41-159c (08/31/2020)

                                                                     2020 IA 100E, page 4 

        Instructions for 2020 IA 100E – Iowa Capital Gain Deduction Sale of a Business
The Iowa  capital gain deduction is subject to     Line 6.  If  “Yes” is checked for Part  I, line  5, 
review by  the Iowa  Department of Revenue.        check the  box to indicate whether the sale of 
The Department will use this form to verify that   the stock or ownership interest was treated as 
the taxpayer(s) qualifies for the deduction. The   a sale or acquisition of assets  for federal 
Department may request additional information      income tax purposes, such as a sale under 
if needed.                                         Internal Revenue Code (IRC)  section 331 
This completed form must be included with the      (corporate liquidation) or IRC section 338 
IA 1040 to support the Iowa capital gain           (stock  purchase  treated as        an asset
deduction claimed.  Complete a separate IA         acquisition). 
100E for each sale of a business.  Complete        Line  7.  Enter the acquisition date and sale 
the form each year of a qualifying installment     date for the business, as indicated in 
sale, including all parts.                         supporting documentation. The acquisition 
For taxpayers filing separately on  the same       date may be the date the business began. 
return, each spouse must complete an IA 100E       Line 8. Enter the length of the holding period in 
for the  Iowa capital gain deduction claimed       years and months. 
based on the  spouse’s ownership  percentage       Line 9.  If the ownership period indicated in 
in the property.                                   Part I, line 7 is less than 10 years, explain why 
Flowcharts to assist  in determining if a  gain    the ownership period differs from the holding 
qualifies are also available in the expanded       period entered in Part  I, line  8. Real property 
instructions online. For more information on the   used in a  business must be held, as defined 
Iowa   capital   gain      deduction, see the      using IRC section 1223, for at least 10 years to 
instructions below and  Iowa  Administrative       qualify for the Iowa capital gain deduction. For 
Code rule 701—40.38.                               example, the business sold may have been 
Part I: Sale of a Business                         acquired in a like-kind exchange or  an 
                                                   involuntary conversion, and the holding period 
Line 1. Enter the name(s) of the business sold. 
                                                   of the business sold plus the previously-held 
Include all legal names and trade names used. 
                                                   business may be at least 10 years.  
If the business was  a sole proprietorship  with 
                                                   Line 10. Describe the business assets sold. If 
no separate legal or trade name, enter the 
                                                   all assets were sold, “Entire business” is 
taxpayer’s name.   
                                                   acceptable. 
Line 2.  Enter the location address of the 
                                                   Line  11.  Enter the fair market value of the 
business  sold  at the time  of the  sale.  Do not 
                                                   tangible personal property and service of the 
enter a PO Box. 
                                                   business sold. Tangible personal property does 
Line 3.  Enter  the primary activities of  the 
                                                   not  include  real  property. The service of the 
business sold. 
                                                   business  means intangible assets used in the 
Line  4.  Check the  box to indicate how the       business,  including  goodwill; going concern 
business sold was organized on the date of the     value; information  base; patent, copyright, 
sale. If “Other,” explain how the business was     formula, design, or similar item; client lists; and 
organized.                                         any franchise, trademark, or trade name. 
Line 5. Check the box to indicate whether the      Include the fair market value of unsold tangible 
taxpayer received the capital gain from the sale   personal property and service of the business. 
of capital  stock or an ownership interest in a    Do not include the value of merchandise or 
business. Note: Most capital gains resulting       inventory of the business unless the sale of the 
from the sale of capital stock or an ownership     merchandise or inventory generated a capital 
interest in a business do not  qualify  for the    gain. If the fair market value of the assets sold 
Iowa capital gain deduction regardless of how      differs from the actual sale price of the assets 
the business is organized. If “Yes” is checked,    sold, include a separate statement explaining  
complete Part  I, line  6  to explain how the      the difference.
capital gain qualifies for  the Iowa capital gain 
deduction. 

                                                                             41-159d (08/31/2020)

                                                              2020 IA 100E Instructions, page 5 
Line 12. Enter the total fair market value of all    Part III: Material Participation in a Business 
of the tangible personal property and service of     Line 1. Check the box to indicate whether  all 
the business including intangible assets.            purchasers reported in Part II, line 6 are lineal 
Line 13.  Calculate the share of the  business       descendants   of  the      taxpayer. Lineal
sold by dividing Part I, line 11 by Part I, line 12. descendants include legally adopted children, 
Round the number to three decimal places,            biological children, stepchildren, grandchildren, 
and enter the number as a percent  (for              and great-grandchildren. 
example: 100.0%; 95.2%).                             Lines 2a-2g. The taxpayer must satisfy at least 
Line 14.   Check the box to indicate whether         one of these seven tests for  material 
Part I, line 13 is at least 90.0%.                   participation for each of  the  10  years prior to 
Part II: Details of Property Sold                    the sale; however,  the taxpayer may instead 
Line 1. Check the box to indicate whether the        satisfy Test 6 for at least three years. Check 
capital gain is from a C corporation.                the box for each test claimed. More than one 
                                                     test may be claimed. For more information on 
Line 2.  Indicate whether the  C corporation 
                                                     the tests  for material participation, see the 
capital gain was from the liquidation of assets 
                                                     instructions below and  Iowa Administrative 
which are  recognized as a sale of assets 
                                                     Code rule 701—40.38(1)“e”. 
under IRC  section 331 or  from certain  stock 
sales which are treated as an acquisition of         Tests 2 and 3: If claiming either of these tests, 
assets under IRC section 338.                        the taxpayer must consider the activities of all 
Line 3. If married filing jointly and both spouses   persons who participated in  the business, 
are the only owners, check yes. If married filing    including employees of the business and non-
separately and both spouses are owners, check        employees who helped maintain the property 
no; each spouse must complete an IA 100E and         or otherwise participated in the business. 
indicate on  line  3  the separate ownership         Test 4: If claiming this test, include a separate 
percentage of that spouse.                           statement  explaining the taxpayer’s activities 
Line  4.  Enter the taxpayer’s ownership             and hours of participation in all businesses 
percentage of the property sold at the time of       claimed. Note: The taxpayer must participate in 
the sale to three decimal places (for example:       each such business more than 100 hours but 
50.0%; 33.3%).  If not the sole owner,  the          no more than 500 hours for each year claimed. 
taxpayer’s ownership percentage must be less         Test 5: If claiming this test, the taxpayer must 
than 100% and greater than 0%.                       be able to show that, for each  year claimed, 
Line  5. Enter the  names  of all persons  and       the taxpayer materially participated under any 
entities that owned the  property  at the time of    of Tests 1 to 4 for five of the 10 years prior to 
sale.  If the capital gain flowed through to  the    the year  claimed. If claiming this test,  the 
taxpayer  from a partnership, S corporation,         taxpayer must also  report having satisfied at 
limited  liability company (LLC), estate,  or trust, least one of Tests 1 to 4. 
all owners of the entity must be reported.           Test 6: If claiming this test, enter at least three 
Line 6. Check all boxes that indicate how the        years in Part III, line 3. These three years may 
taxpayer  acquired the property. If “Other”,         be  before the  10  years prior  to the sale.  A 
explain how the taxpayer  acquired  the              personal service  activity involves        the
property.                                            performance of personal services in the fields 
Line  7. Enter  the  names of all persons and        of health, law, engineering, actuarial science, 
entities that purchased the property.                architecture, accounting, performing arts, 
Line 8. Check the box to indicate whether the        consulting, or any other trade  or business in 
capital gain comes from an installment sale. If      which capital is not a  material income-
“Yes,” enter the date of the first installment, the  producing factor. 
expected date of the final installment, the total    Test 7: If claiming this test, include a separate 
capital gain generated by  the  sale, and  the       statement  explaining how, based on all facts 
capital gain the  taxpayer received during tax       and circumstances, the taxpayer materially 
year 2020. Do  not include any interest              participated in the business each year.
received. 

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                                                     2020 IA 100E Instructions, page 6 

Line 3. Enter the taxpayer’s  daily, weekly, 
monthly, and yearly  activities  in the business 
identified in Part I, line 1 during the  10  years 
prior to the sale (if Test 6 is claimed in Part III, 
line 2, enter the activities for the relevant three-
year period). The activities must verify  the 
taxpayer satisfies the test(s) claimed in Part III, 
line 2. Describe the activities in detail, and 
include the year(s) the taxpayer performed the 
activities. Do not include activities performed 
by any person other than the taxpayer, such as 
tenants and employees. The taxpayer’s 
activities  must be supported by records. 
Records prepared long after the activity 
generally      cannot establish material
participation. 
Line 4. Enter the amount of the taxpayer’s 
capital gain  deduction  claimed.  Note that the 
deduction applies to the net capital gain from a 
sale. Any nonrecaptured losses are treated as 
ordinary income and are not eligible for  the 
Iowa capital gain deduction.  The eligibility of 
the Iowa capital gain deduction reported  here 
may be  subject  to further examination by the 
Department. 

                                                     41-159f (08/31/2020)