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Ftb Notice 2003-6 - Procedures For Making The Election To Defer Certain Gain From The Sale Of Qualified Small Business Stock Form - California Franchise Tax Board Page 2

FTB Notice 2003-6

May 6, 2003

Page 2

operative date of the amendment was for sales made after August 5, 1997, under

subdivision (c) of the amended statute and section 65 of AB 1122 (Stats. 2002, ch. 35),

the legislation that contained the amendment was not enacted by the Legislature until

May 8, 2002. As a result, many taxpayers (other than corporations), who were eligible

to make the election based upon the 2002 amendment were unable to do so on their

original returns because they lacked the statutory authority to do so prior to the

amendment.

Therefore, in order to allow taxpayers (other than corporations) to properly elect the

benefits of Revenue and Taxation Code section 18038.5, which the Legislature intended

to apply to sales of qualified small business stock made after August 5, 1997, the

following special procedure applies.

For taxable years ending before May 8, 2002, a

taxpayer (other than a corporation) may make an election under Revenue and Taxation

Code section 18038.5 on an amended return (or untimely original return) filed on or

before the earlier of the date of expiration of the statute of limitation on assessment or

claim for refund for that taxable year.

The taxpayer (other than a corporation) should make the election by reporting the

amount to be deferred on California Schedule D and writing "section 18038.5

election." In addition, the taxpayer should write "filed pursuant to FTB Notice

2003-6" at the top of the amended return.

The principal authors of this notice are Ann Hodges and Bradley Heller of the Franchise

Tax Board, Legal Branch. For further information regarding this notice, contact Ms.

Hodges or Mr. Heller at the Franchise Tax Board, Legal Branch, P.O. Box 1720,

Rancho Cordova, CA 95741-1720.

partnership held the small business stock. A similar rule applies to S corporations." (H.R. Conf. Rep. No.

105-599, 2

Sess. (June 24, 1998); See also Rev. & Tax. Code § 18038.5, subd. (b)(5).)

Note that this special procedure does not apply to individual taxpayers because they had the authority to

make the election before the revision made by AB 1122, Stats. 2002, ch. 35.

Ftb Notice 2003-6 - Procedures For Making The Election To Defer Certain Gain From The Sale Of Qualified Small Business Stock Form - California Franchise Tax Board Page 2

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