18031. Subchapter O of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to gain or loss on disposition of property,
shall apply, except as otherwise provided.
18031.5. Section 1031(i) of the Internal Revenue Code, relating to
special rules for mutual ditch, reservoir, or irrigation company
stock, shall not apply.
18035.6. Section 1014 of the Internal Revenue Code, relating to
basis of property acquired from a decedent, is modified to provide
that Section 1014(f) of the Internal Revenue Code, relating to
termination date, shall not apply.
18036. (a) In addition to the adjustments to basis provided by
Section 1016(a) of the Internal Revenue Code, a proper adjustment
shall also be made for amounts allowed as deductions as deferred
expenses under subdivision (b) of former Section 17689 or former
Section 17689.5 (relating to certain exploration expenditures) and
resulting in a reduction of the taxpayer's taxes under this part, but
not less than the amounts allowable under those sections for the
taxable year and prior years. A proper adjustment shall also be made
for amounts deducted under Section 17252.5, 17265, or 17266.
(b) Notwithstanding the provisions of Sections 164(a) and 1016(a)
of the Internal Revenue Code, no adjustment to basis shall be made
for any of the following:
(1) Abandonment fees paid in respect of property on which the
open-space easement is terminated under Section 51061 or 51093 of the
Government Code.
(2) Tax recoupment fees paid under Section 51142 of the Government
Code.
(3) Sales or use tax which is paid or incurred by the taxpayer in
connection with the acquisition of property for which a tax credit is
claimed pursuant to Section 17052.13.
(c) The provisions of Section 1016(c) of the Internal Revenue
Code, relating to increase in basis of property on which additional
estate tax is imposed, shall be applicable.
(d) The amendments made to Section 1016 of the Internal Revenue
Code by Section 1913(a) of Public Law 102-486, relating to deduction
for clean-fuel vehicles and certain refueling property, shall apply
to property placed in service after June 30, 1993, without respect to
taxable year.
18036.5. In addition to the adjustments to basis provided by
Section 1016(a) of the Internal Revenue Code, a proper adjustment
shall also be made in the case of property the acquisition of which
resulted under Section 18038.5 in the nonrecognition of any part of
the gain realized on the sale of other property, to the extent
provided in paragraph (4) of subdivision (b) of Section 18038.5.
18036.6. Section 1022 of the Internal Revenue Code, relating to
treatment of property acquired from a decedent dying after December
31, 2009, shall not apply.
18037. An election made by a taxpayer pursuant to Section 1033(g)
(3) of the Internal Revenue Code, relating to the election to treat
outdoor advertising displays as real property, may not be denied
because the taxpayer has, on his or her federal return, elected to
expense the asset.
18037.5. The amendments made by Section 844 of the Pension
Protection Act of 2006 (Public Law 109-280) to Section 1035 of the
Internal Revenue Code, shall not apply.
18038. Section 1040 of the Internal Revenue Code, relating to
transfer of certain real property, does not apply.
18038.4. Section 1045 of the Internal Revenue Code, relating to
rollover of gain from qualified small business stock to another
qualified small business stock, shall not apply.
18038.5. (a) In the case of any sale of qualified small business
stock held by a taxpayer other than a corporation for more than six
months and with respect to which that taxpayer elects the application
of this section, gain from that sale shall be recognized only to the
extent that the amount realized on that sale exceeds:
(1) The cost of any qualified small business stock purchased by
the taxpayer during the 60-day period beginning on the date of that
sale, reduced by
(2) Any portion of the cost previously taken into account under
this section.
This section shall not apply to any gain that is treated as
ordinary income for purposes of this part.
(b) For purposes of this section:
(1) The term "qualified small business stock" has the meaning
given that term by subdivision (c) of Section 18152.5.
(2) A taxpayer shall be treated as having purchased any property
if, but for paragraph (3), the unadjusted basis of that property in
the hands of the taxpayer would be its cost (within the meaning of
Section 1012 of the Internal Revenue Code).
(3) If gain from any sale is not recognized by reason of
subdivision (a), that gain shall be applied to reduce (in the order
acquired) the basis for determining gain or loss of any qualified
small business stock that is purchased by the taxpayer during the
60-day period described in subdivision (a).
(4) For purposes of determining whether the nonrecognition of gain
under subdivision (a) applies to stock that is sold, both of the
following shall apply:
(A) The taxpayer's holding period for that stock and the stock
referred to in paragraph (1) of subdivision (a) shall be determined
without regard to Section 1223 of the Internal Revenue Code.
(B) Only the first six months of the taxpayer's holding period for
the stock referred to in paragraph (1) of subdivision (a) shall be
taken into account for purposes of applying paragraph (2) of
subdivision (c) of Section 18152.5.
(5) Rules similar to the rules of subdivisions (f), (g), (h), (i),
(j), and (k) of Section 18152.5 shall apply.
(c) This section shall apply to sales made after August 5, 1997.
18039. Section 1052 of the Internal Revenue Code, relating to basis
established by prior revenue acts, is modified as follows:
(a) Section 1052(c) of the Internal Revenue Code does not apply.
(b) If the property was acquired, after February 28, 1913, in a
transaction to which the Personal Income Tax Law of 1954 applied, and
the basis thereof, for purposes of the Personal Income Tax Law of
1954, was prescribed by Section 17747, 17751, 17755, 17756, 17757,
17758, or 17788 of that law, then for purposes of this part the basis
shall be the same as the basis therein prescribed in the Personal
Income Tax Law of 1954.
18041.5. (a) No gain shall be recognized with respect to a sale of
an assisted housing development to a tenant association, nonprofit
organization, profit-motivated organization or individual, or public
agency which obligates itself and any successors in interest to
maintain the assisted housing development affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, whichever is greater, provided that
all of the proceeds from the sale are reinvested in residential real
property, other than a personal residence, in this state within two
years after the sale. This obligation shall be recorded at the time
of sale in the office of the county recorder of the county in which
the development is located.
(b) No gain shall be recognized with respect to a sale of a
majority or more of units in an assisted housing development
converted to condominium interests, to a tenant association,
nonprofit organization, profit-motivated organization or individual,
or public agency which obligates itself and any successors in
interest to maintain the condominiums affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
This obligation shall be recorded at the time of sale in the office
of the county recorder of the county in which the development is
located.
(c) No gain shall be recognized with respect to a sale of real
property to a majority or more of existing lower income and very low
income residents of that property, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
(d) No gain shall be recognized with respect to a sale of a
majority or more of units converted to condominium interests to the
existing lower income or very low income residents of that property,
provided that all of the proceeds from the sale are reinvested in
residential real property, other than a personal residence, in this
state within two years after the sale.
(e) For purposes of this section:
(1) "Assisted housing development" means a multifamily rental
housing development that receives federal government assistance,
appearing of record and containing a legal description of the
property, as defined in subdivision (a) of Section 65863.10 of the
Government Code.
(2) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization; or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development, real property, or condominium and which
represents the interests of at least a majority of the tenants in the
assisted housing development, real property, or condominium.
(3) "Nonprofit organization" means a not-for-profit corporation
organized pursuant to Division 2 (commencing with Section 5000) of
Title 1 of the Corporations Code, which has as its principal purpose
the ownership, development, or management of housing or community
development projects for persons and families of lower income and
very low income, and which has a broadly representative board, a
majority of whose members are community-based and has a proven track
record of community service.
(4) "Public agency" means a housing authority, redevelopment
agency, or any other agency of a city, county, or city and county,
whether general law or chartered, which is authorized to own,
develop, or manage housing or community development projects for
persons and families of lower income and very low income.
(5) "Regional or national organization" means a not-for-profit,
charitable corporation organized on a multicounty, state, or
multistate basis which has as its principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of lower income and very low
income.
(6) "Regional or national agency" means a multicounty, state, or
multistate agency which is authorized to own, develop, or manage
housing or community development projects for persons and families of
lower income and very low income.
(7) "Profit-motivated organization or individual" means an
individual or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, which carries on
as a business for profit.
(8) "Lower income" means those residents having an income as
defined by Section 50079.5 of the Health and Safety Code.
(9) "Very low income" means those residents having an income as
defined by Section 50105 of the Health and Safety Code.
(10) "Resident" means a tenant or other person who lawfully
occupies a unit located in a qualified low-income housing project as
defined under Section 17058, and whose income qualifies as lower
income or very low income.
(11) "Condominium" means the interest in real property defined in
Section 783 of the Civil Code.
(f) If the purchase of residential real property results in the
nonrecognition of gain on the sale of an assisted housing
development, real property, or condominium under subdivision (a),
(b), (c), or (d), in determining the adjusted basis of the purchased
residential real property as of any time following the sale of the
assisted housing development, real property, or condominium, the
adjustments to the basis shall include a reduction by an amount equal
to the amount of the gain not so recognized on the sale of the
assisted housing development, real property, or condominium. If more
than one parcel of residential real property has been purchased, the
nonrecognized gain from the sale of the assisted housing development,
real property, or condominium shall be attributed to the parcels of
residential real property on a pro rata basis based upon the purchase
prices of those parcels.
(g) In accordance with subdivision (a), (b), (c), or (d), if the
sale of an assisted housing development, real property, or
condominium results in a gain during the taxable year, then all of
the following shall apply:
(1) The statutory period for the assessment of any deficiency
attributable to any part of the gain shall not expire before the
expiration of four years from the date the Franchise Tax Board is
notified (on the form as the Franchise Tax Board may provide) of one
of the following:
(A) The cost of purchasing the residential real property which
satisfies the requirement of subdivision (a), (b), (c), or (d), and
results in the nonrecognition of gain.
(B) The intention not to reinvest all of the proceeds from the
sale in residential real property within the period specified in
subdivision (a), (b), (c), or (d).
(C) The failure to reinvest all of the proceeds from the sale in
residential real property within the period specified in subdivision
(a), (b), (c), or (d).
(2) The deficiency may be assessed before the expiration of the
period specified in paragraph (1), notwithstanding the provisions of
any other law or rule of law which would otherwise prevent the
assessment.
(3) All information regarding the sale of an assisted housing
development, real property, or condominium, at a gain in accordance
with subdivision (a), (b), (c), or (d), shall be disclosed in the
return for the taxable year in which the sale took place in order to
determine if the sale qualifies and the amount of nonrecognition of
gain qualifies under subdivision (a), (b), (c), or (d).
(h) The Department of Housing and Community Development shall do
all of the following:
(1) Certify that the lower income or very low income resident
meets the definitions provided in paragraphs (8) and (9) of
subdivision (e).
(2) Provide an annual listing to the Franchise Tax Board, in a
form and manner agreed upon by the Franchise Tax Board and the
Department of Housing and Community Development, of the names and
identification numbers of the persons who are members of the group of
purchasers who are lower income or very low income residents that
were issued a certification, and the names and identification numbers
of the sellers of the property.
(3) Provide the group of purchasers who are lower income or very
low income residents a copy of the certification.
(i) The group of purchasers who are lower income or very low
income residents shall do all of the following:
(1) Provide the Department of Housing and Community Development
with documents, as deemed necessary by the department, verifying the
income of each member of the group.
(2) Provide a copy of the certification to the seller of the
assisted housing development, real property, or condominium.
(3) Retain a copy of the certification.
(j) The seller of the assisted housing development, real property,
or condominium shall do all of the following:
(1) Obtain a copy of the certification from the group of
purchasers who are lower income or very low income residents of the
assisted housing development, real property, or condominium.
(2) Retain a copy of the group's lower income or very low income
certification for tax purposes.
18042. (a) Section 1042 of the Internal Revenue Code, relating to
sales of stock to employee stock ownership plans or certain
cooperatives, shall apply to taxable years beginning on or after
January 1, 1995.
(b) For taxable years beginning on or after January 1, 1998,
Section 1042 of the Internal Revenue Code, relating to sales of stock
to employee stock ownership plans or certain cooperatives, is
modified to provide that the term "domestic corporation" shall
instead mean "domestic C corporation."
(c) Section 1042(g) of the Internal Revenue Code, relating to
application of section to sales of stock in agricultural refiners and
processors to eligible farm cooperatives, shall not apply.
18044. The provisions of Section 1044 of the Internal Revenue Code,
relating to rollover of publicly traded securities gain into
specialized small business investment companies, shall not apply to
any taxable year (or portion thereof) that those provisions (or
similar provisions) are not applicable for federal income tax
purposes.
18031. Subchapter O of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to gain or loss on disposition of property,
shall apply, except as otherwise provided.
18031.5. Section 1031(i) of the Internal Revenue Code, relating to
special rules for mutual ditch, reservoir, or irrigation company
stock, shall not apply.
18035.6. Section 1014 of the Internal Revenue Code, relating to
basis of property acquired from a decedent, is modified to provide
that Section 1014(f) of the Internal Revenue Code, relating to
termination date, shall not apply.
18036. (a) In addition to the adjustments to basis provided by
Section 1016(a) of the Internal Revenue Code, a proper adjustment
shall also be made for amounts allowed as deductions as deferred
expenses under subdivision (b) of former Section 17689 or former
Section 17689.5 (relating to certain exploration expenditures) and
resulting in a reduction of the taxpayer's taxes under this part, but
not less than the amounts allowable under those sections for the
taxable year and prior years. A proper adjustment shall also be made
for amounts deducted under Section 17252.5, 17265, or 17266.
(b) Notwithstanding the provisions of Sections 164(a) and 1016(a)
of the Internal Revenue Code, no adjustment to basis shall be made
for any of the following:
(1) Abandonment fees paid in respect of property on which the
open-space easement is terminated under Section 51061 or 51093 of the
Government Code.
(2) Tax recoupment fees paid under Section 51142 of the Government
Code.
(3) Sales or use tax which is paid or incurred by the taxpayer in
connection with the acquisition of property for which a tax credit is
claimed pursuant to Section 17052.13.
(c) The provisions of Section 1016(c) of the Internal Revenue
Code, relating to increase in basis of property on which additional
estate tax is imposed, shall be applicable.
(d) The amendments made to Section 1016 of the Internal Revenue
Code by Section 1913(a) of Public Law 102-486, relating to deduction
for clean-fuel vehicles and certain refueling property, shall apply
to property placed in service after June 30, 1993, without respect to
taxable year.
18036.5. In addition to the adjustments to basis provided by
Section 1016(a) of the Internal Revenue Code, a proper adjustment
shall also be made in the case of property the acquisition of which
resulted under Section 18038.5 in the nonrecognition of any part of
the gain realized on the sale of other property, to the extent
provided in paragraph (4) of subdivision (b) of Section 18038.5.
18036.6. Section 1022 of the Internal Revenue Code, relating to
treatment of property acquired from a decedent dying after December
31, 2009, shall not apply.
18037. An election made by a taxpayer pursuant to Section 1033(g)
(3) of the Internal Revenue Code, relating to the election to treat
outdoor advertising displays as real property, may not be denied
because the taxpayer has, on his or her federal return, elected to
expense the asset.
18037.5. The amendments made by Section 844 of the Pension
Protection Act of 2006 (Public Law 109-280) to Section 1035 of the
Internal Revenue Code, shall not apply.
18038. Section 1040 of the Internal Revenue Code, relating to
transfer of certain real property, does not apply.
18038.4. Section 1045 of the Internal Revenue Code, relating to
rollover of gain from qualified small business stock to another
qualified small business stock, shall not apply.
18038.5. (a) In the case of any sale of qualified small business
stock held by a taxpayer other than a corporation for more than six
months and with respect to which that taxpayer elects the application
of this section, gain from that sale shall be recognized only to the
extent that the amount realized on that sale exceeds:
(1) The cost of any qualified small business stock purchased by
the taxpayer during the 60-day period beginning on the date of that
sale, reduced by
(2) Any portion of the cost previously taken into account under
this section.
This section shall not apply to any gain that is treated as
ordinary income for purposes of this part.
(b) For purposes of this section:
(1) The term "qualified small business stock" has the meaning
given that term by subdivision (c) of Section 18152.5.
(2) A taxpayer shall be treated as having purchased any property
if, but for paragraph (3), the unadjusted basis of that property in
the hands of the taxpayer would be its cost (within the meaning of
Section 1012 of the Internal Revenue Code).
(3) If gain from any sale is not recognized by reason of
subdivision (a), that gain shall be applied to reduce (in the order
acquired) the basis for determining gain or loss of any qualified
small business stock that is purchased by the taxpayer during the
60-day period described in subdivision (a).
(4) For purposes of determining whether the nonrecognition of gain
under subdivision (a) applies to stock that is sold, both of the
following shall apply:
(A) The taxpayer's holding period for that stock and the stock
referred to in paragraph (1) of subdivision (a) shall be determined
without regard to Section 1223 of the Internal Revenue Code.
(B) Only the first six months of the taxpayer's holding period for
the stock referred to in paragraph (1) of subdivision (a) shall be
taken into account for purposes of applying paragraph (2) of
subdivision (c) of Section 18152.5.
(5) Rules similar to the rules of subdivisions (f), (g), (h), (i),
(j), and (k) of Section 18152.5 shall apply.
(c) This section shall apply to sales made after August 5, 1997.
18039. Section 1052 of the Internal Revenue Code, relating to basis
established by prior revenue acts, is modified as follows:
(a) Section 1052(c) of the Internal Revenue Code does not apply.
(b) If the property was acquired, after February 28, 1913, in a
transaction to which the Personal Income Tax Law of 1954 applied, and
the basis thereof, for purposes of the Personal Income Tax Law of
1954, was prescribed by Section 17747, 17751, 17755, 17756, 17757,
17758, or 17788 of that law, then for purposes of this part the basis
shall be the same as the basis therein prescribed in the Personal
Income Tax Law of 1954.
18041.5. (a) No gain shall be recognized with respect to a sale of
an assisted housing development to a tenant association, nonprofit
organization, profit-motivated organization or individual, or public
agency which obligates itself and any successors in interest to
maintain the assisted housing development affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, whichever is greater, provided that
all of the proceeds from the sale are reinvested in residential real
property, other than a personal residence, in this state within two
years after the sale. This obligation shall be recorded at the time
of sale in the office of the county recorder of the county in which
the development is located.
(b) No gain shall be recognized with respect to a sale of a
majority or more of units in an assisted housing development
converted to condominium interests, to a tenant association,
nonprofit organization, profit-motivated organization or individual,
or public agency which obligates itself and any successors in
interest to maintain the condominiums affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
This obligation shall be recorded at the time of sale in the office
of the county recorder of the county in which the development is
located.
(c) No gain shall be recognized with respect to a sale of real
property to a majority or more of existing lower income and very low
income residents of that property, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
(d) No gain shall be recognized with respect to a sale of a
majority or more of units converted to condominium interests to the
existing lower income or very low income residents of that property,
provided that all of the proceeds from the sale are reinvested in
residential real property, other than a personal residence, in this
state within two years after the sale.
(e) For purposes of this section:
(1) "Assisted housing development" means a multifamily rental
housing development that receives federal government assistance,
appearing of record and containing a legal description of the
property, as defined in subdivision (a) of Section 65863.10 of the
Government Code.
(2) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization; or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development, real property, or condominium and which
represents the interests of at least a majority of the tenants in the
assisted housing development, real property, or condominium.
(3) "Nonprofit organization" means a not-for-profit corporation
organized pursuant to Division 2 (commencing with Section 5000) of
Title 1 of the Corporations Code, which has as its principal purpose
the ownership, development, or management of housing or community
development projects for persons and families of lower income and
very low income, and which has a broadly representative board, a
majority of whose members are community-based and has a proven track
record of community service.
(4) "Public agency" means a housing authority, redevelopment
agency, or any other agency of a city, county, or city and county,
whether general law or chartered, which is authorized to own,
develop, or manage housing or community development projects for
persons and families of lower income and very low income.
(5) "Regional or national organization" means a not-for-profit,
charitable corporation organized on a multicounty, state, or
multistate basis which has as its principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of lower income and very low
income.
(6) "Regional or national agency" means a multicounty, state, or
multistate agency which is authorized to own, develop, or manage
housing or community development projects for persons and families of
lower income and very low income.
(7) "Profit-motivated organization or individual" means an
individual or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, which carries on
as a business for profit.
(8) "Lower income" means those residents having an income as
defined by Section 50079.5 of the Health and Safety Code.
(9) "Very low income" means those residents having an income as
defined by Section 50105 of the Health and Safety Code.
(10) "Resident" means a tenant or other person who lawfully
occupies a unit located in a qualified low-income housing project as
defined under Section 17058, and whose income qualifies as lower
income or very low income.
(11) "Condominium" means the interest in real property defined in
Section 783 of the Civil Code.
(f) If the purchase of residential real property results in the
nonrecognition of gain on the sale of an assisted housing
development, real property, or condominium under subdivision (a),
(b), (c), or (d), in determining the adjusted basis of the purchased
residential real property as of any time following the sale of the
assisted housing development, real property, or condominium, the
adjustments to the basis shall include a reduction by an amount equal
to the amount of the gain not so recognized on the sale of the
assisted housing development, real property, or condominium. If more
than one parcel of residential real property has been purchased, the
nonrecognized gain from the sale of the assisted housing development,
real property, or condominium shall be attributed to the parcels of
residential real property on a pro rata basis based upon the purchase
prices of those parcels.
(g) In accordance with subdivision (a), (b), (c), or (d), if the
sale of an assisted housing development, real property, or
condominium results in a gain during the taxable year, then all of
the following shall apply:
(1) The statutory period for the assessment of any deficiency
attributable to any part of the gain shall not expire before the
expiration of four years from the date the Franchise Tax Board is
notified (on the form as the Franchise Tax Board may provide) of one
of the following:
(A) The cost of purchasing the residential real property which
satisfies the requirement of subdivision (a), (b), (c), or (d), and
results in the nonrecognition of gain.
(B) The intention not to reinvest all of the proceeds from the
sale in residential real property within the period specified in
subdivision (a), (b), (c), or (d).
(C) The failure to reinvest all of the proceeds from the sale in
residential real property within the period specified in subdivision
(a), (b), (c), or (d).
(2) The deficiency may be assessed before the expiration of the
period specified in paragraph (1), notwithstanding the provisions of
any other law or rule of law which would otherwise prevent the
assessment.
(3) All information regarding the sale of an assisted housing
development, real property, or condominium, at a gain in accordance
with subdivision (a), (b), (c), or (d), shall be disclosed in the
return for the taxable year in which the sale took place in order to
determine if the sale qualifies and the amount of nonrecognition of
gain qualifies under subdivision (a), (b), (c), or (d).
(h) The Department of Housing and Community Development shall do
all of the following:
(1) Certify that the lower income or very low income resident
meets the definitions provided in paragraphs (8) and (9) of
subdivision (e).
(2) Provide an annual listing to the Franchise Tax Board, in a
form and manner agreed upon by the Franchise Tax Board and the
Department of Housing and Community Development, of the names and
identification numbers of the persons who are members of the group of
purchasers who are lower income or very low income residents that
were issued a certification, and the names and identification numbers
of the sellers of the property.
(3) Provide the group of purchasers who are lower income or very
low income residents a copy of the certification.
(i) The group of purchasers who are lower income or very low
income residents shall do all of the following:
(1) Provide the Department of Housing and Community Development
with documents, as deemed necessary by the department, verifying the
income of each member of the group.
(2) Provide a copy of the certification to the seller of the
assisted housing development, real property, or condominium.
(3) Retain a copy of the certification.
(j) The seller of the assisted housing development, real property,
or condominium shall do all of the following:
(1) Obtain a copy of the certification from the group of
purchasers who are lower income or very low income residents of the
assisted housing development, real property, or condominium.
(2) Retain a copy of the group's lower income or very low income
certification for tax purposes.
18042. (a) Section 1042 of the Internal Revenue Code, relating to
sales of stock to employee stock ownership plans or certain
cooperatives, shall apply to taxable years beginning on or after
January 1, 1995.
(b) For taxable years beginning on or after January 1, 1998,
Section 1042 of the Internal Revenue Code, relating to sales of stock
to employee stock ownership plans or certain cooperatives, is
modified to provide that the term "domestic corporation" shall
instead mean "domestic C corporation."
(c) Section 1042(g) of the Internal Revenue Code, relating to
application of section to sales of stock in agricultural refiners and
processors to eligible farm cooperatives, shall not apply.
18044. The provisions of Section 1044 of the Internal Revenue Code,
relating to rollover of publicly traded securities gain into
specialized small business investment companies, shall not apply to
any taxable year (or portion thereof) that those provisions (or
similar provisions) are not applicable for federal income tax
purposes.
18031. Subchapter O of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to gain or loss on disposition of property,
shall apply, except as otherwise provided.
18031.5. Section 1031(i) of the Internal Revenue Code, relating to
special rules for mutual ditch, reservoir, or irrigation company
stock, shall not apply.
18035.6. Section 1014 of the Internal Revenue Code, relating to
basis of property acquired from a decedent, is modified to provide
that Section 1014(f) of the Internal Revenue Code, relating to
termination date, shall not apply.
18036. (a) In addition to the adjustments to basis provided by
Section 1016(a) of the Internal Revenue Code, a proper adjustment
shall also be made for amounts allowed as deductions as deferred
expenses under subdivision (b) of former Section 17689 or former
Section 17689.5 (relating to certain exploration expenditures) and
resulting in a reduction of the taxpayer's taxes under this part, but
not less than the amounts allowable under those sections for the
taxable year and prior years. A proper adjustment shall also be made
for amounts deducted under Section 17252.5, 17265, or 17266.
(b) Notwithstanding the provisions of Sections 164(a) and 1016(a)
of the Internal Revenue Code, no adjustment to basis shall be made
for any of the following:
(1) Abandonment fees paid in respect of property on which the
open-space easement is terminated under Section 51061 or 51093 of the
Government Code.
(2) Tax recoupment fees paid under Section 51142 of the Government
Code.
(3) Sales or use tax which is paid or incurred by the taxpayer in
connection with the acquisition of property for which a tax credit is
claimed pursuant to Section 17052.13.
(c) The provisions of Section 1016(c) of the Internal Revenue
Code, relating to increase in basis of property on which additional
estate tax is imposed, shall be applicable.
(d) The amendments made to Section 1016 of the Internal Revenue
Code by Section 1913(a) of Public Law 102-486, relating to deduction
for clean-fuel vehicles and certain refueling property, shall apply
to property placed in service after June 30, 1993, without respect to
taxable year.
18036.5. In addition to the adjustments to basis provided by
Section 1016(a) of the Internal Revenue Code, a proper adjustment
shall also be made in the case of property the acquisition of which
resulted under Section 18038.5 in the nonrecognition of any part of
the gain realized on the sale of other property, to the extent
provided in paragraph (4) of subdivision (b) of Section 18038.5.
18036.6. Section 1022 of the Internal Revenue Code, relating to
treatment of property acquired from a decedent dying after December
31, 2009, shall not apply.
18037. An election made by a taxpayer pursuant to Section 1033(g)
(3) of the Internal Revenue Code, relating to the election to treat
outdoor advertising displays as real property, may not be denied
because the taxpayer has, on his or her federal return, elected to
expense the asset.
18037.5. The amendments made by Section 844 of the Pension
Protection Act of 2006 (Public Law 109-280) to Section 1035 of the
Internal Revenue Code, shall not apply.
18038. Section 1040 of the Internal Revenue Code, relating to
transfer of certain real property, does not apply.
18038.4. Section 1045 of the Internal Revenue Code, relating to
rollover of gain from qualified small business stock to another
qualified small business stock, shall not apply.
18038.5. (a) In the case of any sale of qualified small business
stock held by a taxpayer other than a corporation for more than six
months and with respect to which that taxpayer elects the application
of this section, gain from that sale shall be recognized only to the
extent that the amount realized on that sale exceeds:
(1) The cost of any qualified small business stock purchased by
the taxpayer during the 60-day period beginning on the date of that
sale, reduced by
(2) Any portion of the cost previously taken into account under
this section.
This section shall not apply to any gain that is treated as
ordinary income for purposes of this part.
(b) For purposes of this section:
(1) The term "qualified small business stock" has the meaning
given that term by subdivision (c) of Section 18152.5.
(2) A taxpayer shall be treated as having purchased any property
if, but for paragraph (3), the unadjusted basis of that property in
the hands of the taxpayer would be its cost (within the meaning of
Section 1012 of the Internal Revenue Code).
(3) If gain from any sale is not recognized by reason of
subdivision (a), that gain shall be applied to reduce (in the order
acquired) the basis for determining gain or loss of any qualified
small business stock that is purchased by the taxpayer during the
60-day period described in subdivision (a).
(4) For purposes of determining whether the nonrecognition of gain
under subdivision (a) applies to stock that is sold, both of the
following shall apply:
(A) The taxpayer's holding period for that stock and the stock
referred to in paragraph (1) of subdivision (a) shall be determined
without regard to Section 1223 of the Internal Revenue Code.
(B) Only the first six months of the taxpayer's holding period for
the stock referred to in paragraph (1) of subdivision (a) shall be
taken into account for purposes of applying paragraph (2) of
subdivision (c) of Section 18152.5.
(5) Rules similar to the rules of subdivisions (f), (g), (h), (i),
(j), and (k) of Section 18152.5 shall apply.
(c) This section shall apply to sales made after August 5, 1997.
18039. Section 1052 of the Internal Revenue Code, relating to basis
established by prior revenue acts, is modified as follows:
(a) Section 1052(c) of the Internal Revenue Code does not apply.
(b) If the property was acquired, after February 28, 1913, in a
transaction to which the Personal Income Tax Law of 1954 applied, and
the basis thereof, for purposes of the Personal Income Tax Law of
1954, was prescribed by Section 17747, 17751, 17755, 17756, 17757,
17758, or 17788 of that law, then for purposes of this part the basis
shall be the same as the basis therein prescribed in the Personal
Income Tax Law of 1954.
18041.5. (a) No gain shall be recognized with respect to a sale of
an assisted housing development to a tenant association, nonprofit
organization, profit-motivated organization or individual, or public
agency which obligates itself and any successors in interest to
maintain the assisted housing development affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, whichever is greater, provided that
all of the proceeds from the sale are reinvested in residential real
property, other than a personal residence, in this state within two
years after the sale. This obligation shall be recorded at the time
of sale in the office of the county recorder of the county in which
the development is located.
(b) No gain shall be recognized with respect to a sale of a
majority or more of units in an assisted housing development
converted to condominium interests, to a tenant association,
nonprofit organization, profit-motivated organization or individual,
or public agency which obligates itself and any successors in
interest to maintain the condominiums affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
This obligation shall be recorded at the time of sale in the office
of the county recorder of the county in which the development is
located.
(c) No gain shall be recognized with respect to a sale of real
property to a majority or more of existing lower income and very low
income residents of that property, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
(d) No gain shall be recognized with respect to a sale of a
majority or more of units converted to condominium interests to the
existing lower income or very low income residents of that property,
provided that all of the proceeds from the sale are reinvested in
residential real property, other than a personal residence, in this
state within two years after the sale.
(e) For purposes of this section:
(1) "Assisted housing development" means a multifamily rental
housing development that receives federal government assistance,
appearing of record and containing a legal description of the
property, as defined in subdivision (a) of Section 65863.10 of the
Government Code.
(2) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization; or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development, real property, or condominium and which
represents the interests of at least a majority of the tenants in the
assisted housing development, real property, or condominium.
(3) "Nonprofit organization" means a not-for-profit corporation
organized pursuant to Division 2 (commencing with Section 5000) of
Title 1 of the Corporations Code, which has as its principal purpose
the ownership, development, or management of housing or community
development projects for persons and families of lower income and
very low income, and which has a broadly representative board, a
majority of whose members are community-based and has a proven track
record of community service.
(4) "Public agency" means a housing authority, redevelopment
agency, or any other agency of a city, county, or city and county,
whether general law or chartered, which is authorized to own,
develop, or manage housing or community development projects for
persons and families of lower income and very low income.
(5) "Regional or national organization" means a not-for-profit,
charitable corporation organized on a multicounty, state, or
multistate basis which has as its principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of lower income and very low
income.
(6) "Regional or national agency" means a multicounty, state, or
multistate agency which is authorized to own, develop, or manage
housing or community development projects for persons and families of
lower income and very low income.
(7) "Profit-motivated organization or individual" means an
individual or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, which carries on
as a business for profit.
(8) "Lower income" means those residents having an income as
defined by Section 50079.5 of the Health and Safety Code.
(9) "Very low income" means those residents having an income as
defined by Section 50105 of the Health and Safety Code.
(10) "Resident" means a tenant or other person who lawfully
occupies a unit located in a qualified low-income housing project as
defined under Section 17058, and whose income qualifies as lower
income or very low income.
(11) "Condominium" means the interest in real property defined in
Section 783 of the Civil Code.
(f) If the purchase of residential real property results in the
nonrecognition of gain on the sale of an assisted housing
development, real property, or condominium under subdivision (a),
(b), (c), or (d), in determining the adjusted basis of the purchased
residential real property as of any time following the sale of the
assisted housing development, real property, or condominium, the
adjustments to the basis shall include a reduction by an amount equal
to the amount of the gain not so recognized on the sale of the
assisted housing development, real property, or condominium. If more
than one parcel of residential real property has been purchased, the
nonrecognized gain from the sale of the assisted housing development,
real property, or condominium shall be attributed to the parcels of
residential real property on a pro rata basis based upon the purchase
prices of those parcels.
(g) In accordance with subdivision (a), (b), (c), or (d), if the
sale of an assisted housing development, real property, or
condominium results in a gain during the taxable year, then all of
the following shall apply:
(1) The statutory period for the assessment of any deficiency
attributable to any part of the gain shall not expire before the
expiration of four years from the date the Franchise Tax Board is
notified (on the form as the Franchise Tax Board may provide) of one
of the following:
(A) The cost of purchasing the residential real property which
satisfies the requirement of subdivision (a), (b), (c), or (d), and
results in the nonrecognition of gain.
(B) The intention not to reinvest all of the proceeds from the
sale in residential real property within the period specified in
subdivision (a), (b), (c), or (d).
(C) The failure to reinvest all of the proceeds from the sale in
residential real property within the period specified in subdivision
(a), (b), (c), or (d).
(2) The deficiency may be assessed before the expiration of the
period specified in paragraph (1), notwithstanding the provisions of
any other law or rule of law which would otherwise prevent the
assessment.
(3) All information regarding the sale of an assisted housing
development, real property, or condominium, at a gain in accordance
with subdivision (a), (b), (c), or (d), shall be disclosed in the
return for the taxable year in which the sale took place in order to
determine if the sale qualifies and the amount of nonrecognition of
gain qualifies under subdivision (a), (b), (c), or (d).
(h) The Department of Housing and Community Development shall do
all of the following:
(1) Certify that the lower income or very low income resident
meets the definitions provided in paragraphs (8) and (9) of
subdivision (e).
(2) Provide an annual listing to the Franchise Tax Board, in a
form and manner agreed upon by the Franchise Tax Board and the
Department of Housing and Community Development, of the names and
identification numbers of the persons who are members of the group of
purchasers who are lower income or very low income residents that
were issued a certification, and the names and identification numbers
of the sellers of the property.
(3) Provide the group of purchasers who are lower income or very
low income residents a copy of the certification.
(i) The group of purchasers who are lower income or very low
income residents shall do all of the following:
(1) Provide the Department of Housing and Community Development
with documents, as deemed necessary by the department, verifying the
income of each member of the group.
(2) Provide a copy of the certification to the seller of the
assisted housing development, real property, or condominium.
(3) Retain a copy of the certification.
(j) The seller of the assisted housing development, real property,
or condominium shall do all of the following:
(1) Obtain a copy of the certification from the group of
purchasers who are lower income or very low income residents of the
assisted housing development, real property, or condominium.
(2) Retain a copy of the group's lower income or very low income
certification for tax purposes.
18042. (a) Section 1042 of the Internal Revenue Code, relating to
sales of stock to employee stock ownership plans or certain
cooperatives, shall apply to taxable years beginning on or after
January 1, 1995.
(b) For taxable years beginning on or after January 1, 1998,
Section 1042 of the Internal Revenue Code, relating to sales of stock
to employee stock ownership plans or certain cooperatives, is
modified to provide that the term "domestic corporation" shall
instead mean "domestic C corporation."
(c) Section 1042(g) of the Internal Revenue Code, relating to
application of section to sales of stock in agricultural refiners and
processors to eligible farm cooperatives, shall not apply.
18044. The provisions of Section 1044 of the Internal Revenue Code,
relating to rollover of publicly traded securities gain into
specialized small business investment companies, shall not apply to
any taxable year (or portion thereof) that those provisions (or
similar provisions) are not applicable for federal income tax
purposes.
