Exclusion of Gain From Sale of DC Zone Assets(p21)

If you sold or exchanged a District of Columbia Enterprise Zone (DC Zone) asset that you held for more than 5 years, you may be able to exclude the "qualified capital gain." The qualified gain is, generally, any gain recognized in a trade or business that you would otherwise include on Form 4797, Part I. This exclusion also applies to an interest in, or property of, certain businesses operating in the District of Columbia.

A DC Zone asset is any of the following.

• DC Zone business stock.
• DC Zone partnership interest.
• DC Zone business property.

The qualified capital gain is any gain recognized on the sale or exchange of a DC Zone asset that is a capital asset or property used in a trade or business. It does not include any of the following gains.

• Gain treated as ordinary income under section 1245.
• Gain treated as unrecaptured section 1250 gain. The section 1250 gain must be figured as if it applied to all depreciation rather than the additional depreciation.
• Gain attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business.
• Gain from a related-party transaction. See Sales and Exchanges Between Related Persons in chapter 2.

See section 1400B of the Internal Revenue Code for more details on DC Zone assets and special rules.