The Sale of State Tax Credits: A Tax Court Decision Isn’t a Tempel of Doom

Posted: 31 Oct 2011

See all articles by Erik M. Jensen

Erik M. Jensen

Case Western Reserve University School of Law

Date Written: June 1, 2011

Abstract

In Tempel v. Commissioner, decided in April 2011, the Tax Court came to a number of important conclusions about sales of state income tax credits that occurred shortly after the credits had been received. The gain was held to be capital gain (with the court implicitly concluding that the credits were property), but the holding period for the credits began at receipt and the taxpayers had no basis in the credits. The bottom line was that the gain was short-term capital gain, with no basis offset, a negative result for these taxpayers. But the Tax Court’s conclusion that the credits were capital assets creates planning opportunities for others.

Keywords: Tempel v. Commissioner, Tax Court decision, state income tax credits, capital gains

JEL Classification: K34

Suggested Citation

Jensen, Erik M., The Sale of State Tax Credits: A Tax Court Decision Isn’t a Tempel of Doom (June 1, 2011). Journal Taxation of Investments. Vol. 91, Summer 2011; Case Legal Studies Research Paper No. 2011-26. Available at SSRN: https://ssrn.com/abstract=1952054

Erik M. Jensen (Contact Author)

Case Western Reserve University School of Law ( email )

11075 East Boulevard
Cleveland, OH 44106-7148
United States
216-368-3613 (Phone)
216-368-2086 (Fax)

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