Qualifying Net Capital Gains
There are three different rules that determine which net capital gains qualify for the Colorado source capital gain subtraction. The first is a general rule that applies every year regardless of whether there is a budget surplus. This general rule is expanded in two circumstances, both of which depend on Colorado having a qualified budget surplus during the tax year.

General Rule
Under the general rule, this subtraction is available to taxpayers who have net capital gains that meet the following qualifications:

• Colorado sources -- gains must be earned from the sale of either:
• real or tangible personal property located in Colorado at the time of sale, or
• stocks or ownership interest in a Colorado company, limited liability company, or partnership,
• Acquisition date -- taxpayer must have acquired the asset on or after May 9, 1994,
• Holding period -- taxpayer must have owned the capital asset for at least five uninterrupted years prior to the sale,
• Must be included in the taxpayer's federal taxable income reported on taxpayer's Colorado income tax return.

NOTE: The expanded subtraction for assets acquired before May 9, 1994 and for assets held less than five years are not available for tax years 2002, 2003, and 2004. The State of Colorado did not have a budget surplus for the years ending June 30, 2002 through June 30, 2004.

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