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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. $ ______________

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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.

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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. 

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