LRB-3297/1
MES:jld:pg
2007 - 2008 LEGISLATURE
February 15, 2008 - Introduced by Representatives Wieckert, Kerkman, Musser,
Townsend, A. Ott
and Gunderson, cosponsored by Senator Darling. Referred
to Committee on Housing.
AB808,1,3 1An Act to amend 71.01 (13) and 71.01 (14); and to create 71.05 (24) of the
2statutes; relating to: creating a procedure for certain taxpayers to defer
3taxation on certain capital gains that are used to purchase a primary residence.
Analysis by the Legislative Reference Bureau
Under current law, there is an income tax exclusion for individuals for 60
percent of the net capital gains realized from the sale of assets held for at least one
year.
Under this bill, an individual (claimant) may elect to defer the payment of
income taxes on a percentage of the gain realized from the sale of any asset held more
than one year (original asset), other than gain realized from the sale of an asset that
was obtained in a tax-free exchange of capital assets or the sale of property
purchased as the result of an involuntary conversion, if the claimant completes a
number of requirements. The allowable percentage of gain that may be deferred
under the bill starts at 4 percent in taxable year 2008, and increases by another 4
percent each year until it reaches 40 percent in taxable year 2017.
Under the bill, the claimant must place the gain from the original asset in a
segregated account in a financial institution, must purchase a primary residential
dwelling within 90 days after the sale of the original asset that generated the gain,
and must notify the Department of Revenue (DOR) on a form prepared by DOR that
the claimant is deferring the payment of income tax on the gain from the original
asset because the proceeds have been reinvested. The cost of the dwelling must be
equal to or greater than the gain generated by the sale of the original asset.

The bill also specifies that the basis of the dwelling shall be its cost minus the
gain generated by the sale of the original asset. If a claimant defers the payment of
income taxes on the gain generated by the sale of the original asset, the claimant may
not use that gain to net the claimant's gains and losses as the claimant could do if
the claimant did not elect to defer the payment of taxes on the gain.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB808, s. 1 1Section 1. 71.01 (13) of the statutes is amended to read:
AB808,2,42 71.01 (13) "Wisconsin adjusted gross income" means federal adjusted gross
3income, with the modifications prescribed in s. 71.05 (6) to (12), (19) and, (20), and
4(24)
.
AB808, s. 2 5Section 2. 71.01 (14) of the statutes is amended to read:
AB808,2,96 71.01 (14) "Wisconsin net operating loss" of persons other than corporations
7means "federal net operating loss" adjusted as prescribed in s. 71.05 (6) (a) and (b),
8(7) to (12) and, (19) to , (21), and (24), except s. 71.05 (6) (b) 9., except that no
9deductions allowable on schedule A for federal income tax purposes are allowable.
AB808, s. 3 10Section 3. 71.05 (24) of the statutes is created to read:
AB808,2,1211 71.05 (24) Income tax deferral; long-term capital assets. (a) In this
12subsection:
AB808,2,1413 1. "Claimant" means an individual who claims a subtraction from federal
14adjusted gross income under this subsection.
AB808,2,1515 2. "Financial institution" has the meaning given in s. 69.30 (1) (b).
AB808,2,1716 3. "Long-term capital gain" means the gain realized from the sale of any asset
17held more than one year, other than gain realized from any of the following:
AB808,3,2
1a. The sale of an asset that was obtained in a tax-free exchange of capital
2assets.
AB808,3,33 b. The sale of property purchased as the result of an involuntary conversion.
AB808,3,54 4. "Primary residence" means the principal residential dwelling that is owned
5and occupied by a claimant.
AB808,3,86 (b) Subject to par. (e), a claimant may subtract from federal adjusted gross
7income any amount of a long-term capital gain if the claimant does all of the
8following:
AB808,3,109 1. Immediately deposits the gain into a segregated account in a financial
10institution.
AB808,3,1311 2. Within 90 days after the sale of the asset that generated the gain, purchases
12a primary residence in this state of equal or greater value using all of the proceeds
13in the account described under subd. 1.
AB808,3,1814 3. After purchasing a primary residence as described under subd. 2.,
15immediately notifies the department, on a form prepared by the department, that the
16claimant will not declare on the claimant's income tax return the gain described
17under subd. 1. because the claimant has reinvested the capital gain as described
18under subd. 2.
AB808,3,2119 (c) The basis of the purchased primary residence described in par. (b) 2. shall
20be calculated by subtracting the gain described in par. (b) 1. from the cost of the
21purchased primary residence described in par. (b) 2.
AB808,3,2422 (d) If a claimant defers the payment of income taxes on a capital gain under this
23subsection, the claimant may not use the gain described under par. (b) 1. to net
24capital gains and losses, as described under sub. (10) (c).
AB808,4,3
1(e) 1. For taxable years beginning after December 31, 2007, and before January
21, 2009, the amount calculated under par. (b) that may be subtracted from federal
3adjusted gross income shall be multiplied by 4 percent.
AB808,4,64 2. For taxable years beginning after December 31, 2008, and before January
51, 2010, the amount calculated under par. (b) that may be subtracted from federal
6adjusted gross income shall be multiplied by 8 percent.
AB808,4,97 3. For taxable years beginning after December 31, 2009, and before January
81, 2011, the amount calculated under par. (b) that may be subtracted from federal
9adjusted gross income shall be multiplied by 12 percent.
AB808,4,1210 4. For taxable years beginning after December 31, 2010, and before January
111, 2012, the amount calculated under par. (b) that may be subtracted from federal
12adjusted gross income shall be multiplied by 16 percent.
AB808,4,1513 5. For taxable years beginning after December 31, 2011, and before January
141, 2013, the amount calculated under par. (b) that may be subtracted from federal
15adjusted gross income shall be multiplied by 20 percent.
AB808,4,1816 6. For taxable years beginning after December 31, 2012, and before January
171, 2014, the amount calculated under par. (b) that may be subtracted from federal
18adjusted gross income shall be multiplied by 24 percent.
AB808,4,2119 7. For taxable years beginning after December 31, 2013, and before January
201, 2015, the amount calculated under par. (b) that may be subtracted from federal
21adjusted gross income shall be multiplied by 28 percent.
AB808,4,2422 8. For taxable years beginning after December 31, 2014, and before January
231, 2016, the amount calculated under par. (b) that may be subtracted from federal
24adjusted gross income shall be multiplied by 32 percent.
AB808,5,3
19. For taxable years beginning after December 31, 2015, and before January
21, 2017, the amount calculated under par. (b) that may be subtracted from federal
3adjusted gross income shall be multiplied by 36 percent.
AB808,5,64 10. For taxable years beginning after December 31, 2016, the amount
5calculated under par. (b) that may be subtracted from federal adjusted gross income
6shall be multiplied by 40 percent.
AB808,5,77 (End)
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