Tax Type
Individual Income Tax
Description
Gain on sale of Virginia obligations
Topic
Subtractions and Exclusions
Taxable Income
Date Issued
05-10-1988
May 10, 1988
Re: Ruling Request
Individual Income Tax
Dear***************
This is in reply to your letter of December 29, 1987 in which you request a ruling regarding the taxability of the gain recognized on the sale of bonds issued by the Virginia College Building Authority or by public institutions of learning.
Virginia Code §58.1-322 C.2. specifically provides a subtraction from federal adjusted gross income (to the extent included in federal adjusted gross income) for "[i]nterest on obligations of this Commonwealth or of any political subdivision or instrumentality of this Commonwealth." In addition, the acts creating agencies or political subdivisions may contain an exemption from state and local taxation for interest and the gain arising from the sale of the obligations of the agency or political subdivision. However, acts creating other agencies may refer only to interest or are entirely silent as to the taxation of the agency's obligations.
Regardless, of the language contained in the act creating an agency or political subdivision, all interest on Virginia obligations is exempt as set forth above (Virginia Code §58.1-322 C.2.). Because Virginia income tax law is silent regarding the gain on the sale of an obligation, the gain on the sale of any such obligation is taxable unless there is a specific statutory exemption for the gain on the sale.
The department has examined the provisions of §§23-25, 23-30.01(e) and 23-30.53 of the Code of Virginia relating to bonds issued by the Virginia College Building Authority and certain public institutions of learning. Based upon the provisions contained in §§23-30.01(e) and 23-30.53, which specifically exempt the gain on the sale of such bonds from taxation, we have determined that the gain on the sale of the bonds referenced in these sections (bonds issued by the Virginia College Building Authority and bonds issued under the Educational} Facilities Authority Act) may be subtracted from federal adjusted gross income to the extent that such gain is contained in federal adjusted gross income.
In addition, the following Virginia Code sections are among those that specifically exempt from taxation the gain from the sale of certain bonds: §15.1-1258 (water and sewer authorities), §15.1-1383 (industrial development authorities), §15.1-1596 (hospital authorities), §22.1-175 (Virginia Public School Authority), §33.1-307 (State Revenue Bond Act), §36-55.37 (Virginia Housing Development Authority), and §62.1-145 (Virginia Port Authority).
However, the provisions of §23-25 do not provide a similar specific exemption from taxation for the gain on the sale of bond issued by the institutions listed in §23-14 of the Code of Virginia. Accordingly, the gain on the sale of these bonds may not be subtracted from federal adjusted gross income.
The assessment issued to your clients will be adjusted according to the above determination.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner