S 1049 General Bill, By Passailaigue
 A Bill to amend Section 12-7-430, Code of Laws of South Carolina, 1976,
 relating to income taxation, so as to further define certain real estate
 activities and limitation of losses relating to real estate activities.

   09/23/91  Senate Introduced and read first time SJ-17
   09/23/91  Senate Referred to Committee on Finance SJ-17

A BILL

TO AMEND SECTION 12-7-430, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO INCOME TAXATION, SO AS TO FURTHER DEFINE CERTAIN REAL ESTATE ACTIVITIES AND LIMITATION OF LOSSES RELATING TO REAL ESTATE ACTIVITIES.

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

SECTION 1. Section 12-7-430 is amended by adding a new item to read:

"( ) In the case of a taxpayer in the real estate business, the determination of activity as passive must be made by treating the taxpayer's rental real property operations, undertakings, and activities in the same manner as nonrental trade or business operations, undertakings, and activities.

(1) For purposes of this section, an individual is engaged in the real property business if:

(A) such individual spends at least fifty percent of such individual's working time in real property operations; and

(B) such individual spends more than five hundred hours during the taxable year in real property operations.

(2) For purposes of this section, the term `real property operations' means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, brokerage, appraisal, and finance operations.

(3) For purposes of this section, the term `working time' means any time spent as an employee, sole proprietor, `S' corporation shareholder, partner in a partnership, or beneficiary of a trust or estate.

(4) For purposes of this section, a closely held `C' corporation is engaged in the real property business if:

(A) one or more shareholders owning stock representing more than fifty percent (by value) of the outstanding stock of such corporation materially participate in the aggregate real property activities of such corporation; or

(B) such corporation meets the requirements of this section with respect to the aggregate real property activities of such corporation.

Except for rental activities treated in the same manner as nonrental trade or business activities pursuant to this section, each rental activity is a passive activity without regard to whether or not the taxpayer materially participates in the rental activity.

This section shall be applied without regard to whether or not the taxpayer materially participates in the activity."

SECTION 2. This act, upon approval by the Governor, shall be effective for tax years beginning after December 31, 1991.