AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO STATE TAXES ON THE CAPITAL GAINS REALIZED FROM THE SALE OF A TAXPAYER'S PRINCIPAL RESIDENCE.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Chapter 11, Title 30, Delaware Code, is amended by adding a new section 1149 to read as follows:
§ 1149. Treatment of capital gains realized from the sale of a taxpayer's principal residence
(a) If property used by the taxpayer as his old principal residence is sold by him after December 31, 1968 and within a period beginning one year before the date of such sale and ending one year after such date, property is purchased and used by the Taxpayer as his new principal residence, gain (if any) shall be recognized only to the extent that the taxpayer's adjusted sales price (as defined in subsection (b)) of the old residence exceeds the taxpayer's cost of purchasing the new residence.
(b) Adjusted sales price defined —
(I) For purposes of this section, the term "adjusted sales price" means the amount realized, reduced by the aggregate of the expenses for work performed on the old residence in order to assist in its sale.
(II) Limitations. — The reduction provided in paragraph (I) applies only to expenses —
(A) for work performed during the 90-day period ending on the day on which the contract to sell the old residence is entered into;
() which are paid on or before the 30th day after the date of the sale of the old residence; and
(A) which are —
(i) not allowable as deductions in computing taxable income; and
(ii) not taken into account in computing the amount realized from the sale of the old residence.
(III) Effective date. — The reduction provided in paragraph (I) applies to expenses for work performed in any taxable year, but only in the case of a sale or exchange or an old residence which occurs after December 31, 1968.
(c) Rules for application of section —For purposes of this section:
(I) An exchange by the taxpayer of his residence for other property shall be treated as a sale of such residence, and the acquisition of a residence on the exchange of property shall be treated as a purchase of such residence.
() A residence any part of which was constructed or reconstructed by the taxpayer shall be treated as purchased by the taxpayer. In determining the taxpayer's cost of purchasing a residence, there shall be included only so much of his cost as is attributable to the acquisition, construction, reconstruction, and improvements made which are properly chargeable to capital account, during the period specified in subsection (a).
(I) If a residence is purchased by the taxpayer before the date of his sale of the old residence, the purchased residence shall not be treated as his new residence if sold or otherwise disposed of by him before the date of the sale of the old residence.
(II) In the case of a new residence the construction of which was commenced by the taxpayer before the expiration of one year after the date of the sale of the old residence, the period specified in subsection (a), shall be treated as including a period of 18 months beginning with the date of the sale of the old residence.
(d) Basis of new residence — Where the purchase of a new residence results, under subsection (a) in the non-recognition of gain on the sale of an old residence, in determining the adjusted basis of the new residence as of any time following the sale of the old residence, the adjusted basis shall include a reduction by an amount equal to the amount of the gain not so recognized on the sale of the old residence. For this purpose, the amount of the gain not so recognized on the sale of the old residence includes only so much of such gain as is not recognized by reason of the cost, up to such time, of purchasing the new residence.
(e) In order for this section to apply, the new residence purchased must be located within the State of Delaware.
(f) If the taxable or taxable and spouse or either of them have reached sixty-five (65) years of age before the date of the sale of their principal residence within Delaware a specific exemption of $15,000 shall be granted to be applied against the capital gains resulting from the sale thereof provided that such premises shall have been the principal residence of the taxables during five of the preceding eight years before date of sale. The exemption provided by this subsection shall not apply to any sale made by the taxable or taxable and spouse or either of them if any exemption under this subsection has been allowed to either or both of them with respect to a previous sale of a residence. This subsection shall not apply to the sale of a principal residence which occurs before December 31, 1968.
(g) Principal residence shall refer to the dwelling of the taxable and the land immediately adjacent thereto, provided that land in excess of five (5) acres in area shall not be considered a part of the principal residence.
Approved March 25, 1970.