1. What is the qualified Wisconsin business capital gain exclusion?
   
   
2. What is a qualified investment?
   
   
3. Are contributions of property in a business considered an investment?
   
   
4. What is a qualified Wisconsin business?
   
   
5. Who may claim the long-term capital gain exclusion?
   
   
6. How do I claim the long-term capital gain exclusion?
   
   
7. If a partner purchases another partner's interest, can that purchase qualify as an investment?
   
   

1. What is the qualified Wisconsin business capital gain exclusion?

   An exclusion allowed for certain long-term capital gain from the sale of a qualified investment.

2. What is a qualified investment?

   A qualified investment means an amount paid to acquire stock or other ownership interest in a partnership, corporation, tax-option corporation, or limited liability company treated as a partnership or corporation. A qualified investment is an investment in a qualified Wisconsin business where:

   1. The investment was in a business that was a qualified Wisconsin business for the year of the investment and for at least 2 of the 4 subsequent years, and
      
   2. The investment was made after December 31, 2010, and held for at least 5 uninterrupted years
      
      

   Note: An investment in an entity disregarded for Wisconsin income tax purposes and reported on the owner's individual income tax return (such as on a Schedule C) is not considered a qualifying investment. Therefore, no exclusion would be allowed in the year of the sale.

3. Are contributions of property in a business considered an investment?

   Yes, stock or other ownership interest acquired through the exchange of property may qualify as an investment in a qualified Wisconsin business.

4. What is a qualified Wisconsin business?

   A qualified Wisconsin business is a business certified by the Wisconsin Economic Development Corporation (WEDC) or registered with the Department of Revenue (DOR).

   The WEDC was responsible for certifying businesses through 2013. The DOR registration program began in 2014.

   For more information on qualified Wisconsin businesses, see Registration of Qualified Wisconsin Businesses common questions.

5. Who may claim the long-term capital gain exclusion?

   According to sec. 71.05(25)(a)1., Wis. Stats., the claimant must be an individual, including individual partners or members of a partnership, limited liability company, or limited liability partnership, or an individual shareholder of a corporation.

6. How do I claim the long-term capital gain exclusion?

   Individuals, including individual partners or members of a partnership, limited liability company, or limited liability partnership, or an individual shareholder of a corporation, must file Schedule QI, Sale of Investment in a Qualified Wisconsin Business, in order to claim the long-term capital gain exclusion.

   The amount of gain that qualifies for the exclusion, as determined on Schedule QI, is then entered as an adjustment on line 15a of Schedule WD, Capital Gains and Losses.

7. If a partner purchases another partner's interest, can that purchase qualify as an investment?

   Yes, the purchase may qualify as an investment in a qualified Wisconsin business.

Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations enacted as of March 28, 2024: secs. 71.03, 71.05 and 73.03, Wis. Stats., sec. 238.146, Wis. Stats. (2011-2012), and secs. Tax 2.08 and 2.986, Wis. Adm. Code.

Laws enacted and in effect after this date, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to this date, that is contrary to the information in this document is superseded by this document, according to sec. 73.16(2)(a), Wis. Stats.

The department welcomes your input on our guidance. Submit comments on this guidance document.

Guidance Document Number: 100192

March 28, 2024