45th legislature - STATE OF NEW MEXICO - second session, 2002
RELATING TO TAXATION; AMENDING THE INCOME TAX ACT TO PROVIDE A DEDUCTION FOR NET CAPITAL GAIN INCOME FROM THE SALE OF A CLOSELY HELD BUSINESS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 7-2-34 NMSA 1978 (being Laws 1999, Chapter 205, Section 1) is amended to read:
"7-2-34. DEDUCTION--NET CAPITAL GAIN INCOME.--
A. Except as provided in Subsection [B] C of this
section, a taxpayer may claim a deduction from net income in
an amount equal to the greater of:
(1) the taxpayer's net capital gain income for the taxable year for which the deduction is being claimed, but not to exceed one thousand dollars ($1,000); or
(2) the taxpayer's net capital gain income attributable to the sale of a closely held business if the income is included in net income and allocated or apportioned to New Mexico.
B. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the deduction provided by this section that would have been allowed on the joint return.
[B.] C. A taxpayer may not claim the deduction
provided in Subsection A of this section if the taxpayer has
claimed the credit provided in Section 7-2D-8.1 NMSA 1978.
[C.] D. As used in this section:
(1) "closely held business" means a trade or business:
(a) operated as a sole proprietorship; or
(b) operated by a legal entity whose outstanding equity interests are owned by seventy-five or fewer individuals;
(2) "equity interest" means the equity of a legal entity, including the capital stock of a corporation, the interest of a general or limited partner in a partnership or the interest of a member of a limited liability company; (3) "net capital gain" means "net capital gain" as defined in Section 1222 (11) of the Internal Revenue Code; and
(4) "sale of a closely held business" means the sale or exchange of:
(a) substantially all of the assets of a closely held business; or
(b) a taxpayer's entire equity interest in a closely held business in a transaction in which substantially all of the equity interests of the closely held business are sold or exchanged."
Section 2. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2002.