The Internal Revenue Service (IRS) has released a Chief Counsel Advice (CCA) memorandum stating that the sale of certain Massachusetts state tax credits, including low-income housing and historic tax credits, to a third party by the original recipient is a taxable event. Additionally, the IRS said that the original recipient has no tax cost basis in the tax credit and that the original recipient’s gain on the sale of a nonrefundable credit is capital gain. For the purchaser, basis for the tax credit is the cost of the tax credit and the purchaser must recognize apportioned gain, if the tax credit is purchased for less than its face value, when the tax credit is used to satisfy state tax liability.
To view the memorandum, click here.
