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Bill 3394

                    Current Status

Bill Number:                      3394
Type of Legislation:              General Bill GB
Introducing Body:                 House
Introduced Date:                  20010131
Primary Sponsor:                  Davenport
All Sponsors:                     Davenport
Drafted Document Number:          l:\council\bills\dka\4061mm01.doc
Residing Body:                    House
Current Committee:                Ways and Means Committee 30 HWM
Subject:                          Income tax, small business selling 
                                  property to purchase new business within 
                                  certain time; portion of gain nonrecognized


                        History

Body    Date      Action Description                     Com     Leg Involved
______  ________  ______________________________________ _______ ____________
House   20010131  Introduced, read first time,           30 HWM
                  referred to Committee


              Versions of This Bill

TO AMEND ARTICLE 9, CHAPTER 6, TITLE 12, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO CALCULATION OF TAXABLE INCOME FOR STATE INCOME TAX PURPOSES, BY ADDING SECTION 12-6-1240 SO AS TO PROVIDE FOR NONRECOGNITION OF A PORTION OF THE GAIN REALIZED WHEN A SMALL BUSINESS TAXPAYER SELLS BUSINESS REAL PROPERTY AND PURCHASES NEW BUSINESS REAL PROPERTY WITHIN A SPECIFIED FOUR-YEAR PERIOD AND TO PROVIDE DEFINITIONS.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    Article 9, Chapter 6, Title 12 of the 1976 Code is amended by adding:

    "Section 12-6-1240.    (A)    If real property used by a small business taxpayer as business real property is sold by him and, between two years before the date of the sale and two years after the date of the sale, real property located in this State is purchased and used by the small business taxpayer as business real property, gain from the sale is recognized only to the extent that the adjusted sales price of the old business real property exceeds the taxpayer's cost of purchasing the new business real property.

    (B)(1)    An exchange by the taxpayer of his business real property is treated like a sale of the business real property, and the acquisition of business real property upon the exchange of property is treated like a purchase of business real property.

        (2)    A part of business real property which was constructed or reconstructed by the taxpayer is treated like a purchase by the small business taxpayer. In determining the taxpayer's cost of purchasing business real property, only that portion of his cost attributable to the acquisition, construction, reconstruction, and improvements made which are properly chargeable to capital account, during the four-year period specified in subsection (A), may be included.

        (3)    If business real property is purchased by the small business taxpayer before the date of his sale of the old business real property, the purchased business real property may not be treated like new business real property if sold or otherwise disposed of by him before the date of the sale of the old business real property.

    (C)    When the purchase of new business real property results in the nonrecognition of gain on the sale of the old business real property, the adjusted basis of the new business real property as of any time following the sale of the old business real property must reflect a reduction of the basis by an amount equal to the amount of the gain not recognized on the sale of the old business real property. For these purposes, the amount of the gain not recognized on the sale of the old business real property includes only so much of the gain not realized by reason of the cost, up to that time, of purchasing the new business real property.

    (D)    For purposes of this section:

        (1)    'Adjusted sales price' means the amount realized from the sale.

        (2)    'Small business taxpayer' means a business which employs fewer than one hundred full-time employees as of December thirty-first of the year of the sale and has gross receipts of less than one million dollars in the year of the sale.

        (3)    'Business real property' means real property used solely and exclusively in the business of the taxpayer."

SECTION    2.    Upon approval by the Governor, this act is effective for tax years beginning after December 31, 2000.

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