The Sale of State Tax Credits: A Tax Court Decision Isn’t a Temple of Doom


Erik M. Jensen


In Tempel v. Commissioner, decided in April 211, the Tax Court came to a number of important conclusions about sales of state income tax credits that occurred shortly after the credits had been received. The gain was held to be capital gain (with the court implicitly concluding that the credits were property), but the holding period for the credits began at receipt and the taxpayers had no basis in the credits. The bottom line was that the gain was short-term capital gain, with no basis offset, a negative result for these taxpayers. But the Tax Court’s conclusion that the credits were capital assets creates planning opportunities for others.


Tempel v. Commissioner, Tax Court decision, state income tax credits, capital gains

Publication Date


Document Type


Place of Original Publication

Journal of Taxation of Investments

Publication Information

28 Journal of Taxation of Investments 91 (2011)

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COinS Erik M. Jensen Faculty Bio