Endnotes
[1] RCW 82.87.020(13) (defining “Washington capital gains” to mean “adjusted taxable gain, as modified in RCW 82.87.060); (1) (defining “adjusted taxable gain” to mean federal net long-term capital gain,” subject to several additions and subtractions).
[2] RCW 82.87.020(3).
[3] RCW 82.87.020(1)(a); RCW 82.87.050. The reference to “sales or exchanges that are exempt from the tax” may also refer to pre-effective date sales and may require adding any long-term capital loss carryforward from sales prior to January 1, 2022.
[4] RCW 82.87.020(1)(b); RCW 82.87.100.
[5] RCW 82.87.020(1)(c).
[6] RCW 82.87.020(1)(d).
[7] RCW 82.87.020(1)(e). Again, the reference to “sales or exchanges that are exempt from the tax” may also refer to pre-effective date sales and may be the legal basis for subtracting any long-term capital gain from transactions prior to January 1, 2022.
[8] RCW 82.87.040(4)(b)(ii).
[9] RCW 82.87.060(1).
[10] RCW 82.87.060(3); RCW 82.87.070.
[11] RCW 82.87.060(3); RCW 82.87.070.
[12] RCW 82.87.060(4); RCW 82.87.080.
[13] RCW 82.87.040(1).
[14] IRC §1222(7).
[15] RCW 82.87.020(3); IRS Schedule D, “Capital Gains and Losses,” 2022.
[16] For example, Line 15 includes the deemed long-term capital gain portion of options and futures trading income under IRC §1256 added to Line 11 of Schedule D, even if the options and futures contracts are held for less than one year.
[17] RCW 82.87.020(1)(c) (“Less any amount of long-term capital gain from a sale or exchange that is not allocated to Washington under RCW 82.87.100, to the extent such gain was included in calculating federal net long-term capital gain”).
[18] WAC 458-20-300(1)(a).
[19] RCW 82.87.020(1)(c) refers to adding loss carryforward from sales not allocated to Washington under RCW 82.87.100, which relates only to the geographic allocation of gains and losses. No other provision in the statute provides for adding back pre-effective date loss carryforward. The regulation also does not specify that pre-effective date loss carryforward must be added back, but the statement in WAC 458-20-300(1)(a) that the tax “is not imposed on any sale or exchange occurring prior to January 1, 2022” may, by implication, require adding back such pre-effective date loss carryforward.
[20] RCW 82.87.020(3). A spokesperson for the Department of Revenue has reportedly suggested that exempt gain from QSBS is subject to the Washington capital gains tax, but there appears to be no statutory basis for that position.
[21] Frequently Asked Questions About Washington Capital Gains Tax.
[22] RCW 82.87.040(1) indicates that the tax is imposed “on the sale or exchange of long-term capital assets.” Compare Quinn v. State, slip opinion 100769-8 (2023), at 45 (“the capital gains tax is levied on capital transactions…and the taxable incident is the taxpayer’s exercise of their power to dispose of capital assets”) with Quinn, at 31 (“That there may not be a personal, deliberate decision to engage in a transaction by the taxpayer in some situations does not transform this tax from an excise tax into a property tax”).
[23] RCW 82.87.040(4)(b)(i).
[24] RCW 82.87.040(4)(b)(i).
[25] See RCW 82.87.040(4)(b)(i).
[26] RCW 82.87.040(b)(ii); the income and losses of a grantor trust are treated as owned by the grantor and not allocable to the trust beneficiaries.
[27] WAC 458-20-300(1)(a); Frequently Asked Questions About Washington Capital Gains Tax; RCW 82.87.020(1)(e) may be read to treat such sales as “exempt.”
[28] WAC 458-20-300(1)(a).
[29] RCW 82.87.020(1)(e).
[30] Treas. Reg. §25.2511-2(c) (providing that a gift is incomplete “if and to the extent that a reserved power gives the donor the power to name new beneficiaries…”).
[31] RCW 82.87.040(4)(b)(ii). The grantor’s relinquishment of the power to change beneficiaries would cause the gift to be incomplete under Treas. Reg. §25.2511-2(f); doing so may end the treatment of the trust as a deemed grantor trust for Washington capital gains tax purposes, in which case the grantor would be subject to tax only on the portion of distributions characterized as long-term capital gain allocated to Washington. This assumes that the statutory phrase “the grantor’s transfer of assets to the trust is treated as an incomplete gift” refers not to the grantor’s initial, actual transfer of assets to the trust but to a hypothetical transfer of assets to the trust as of the date that the trust recognizes long-term capital gain.
[32] RCW 82.87.040(1); RCW 82.87.020(6).
[33] RCW 82.87.020(1)(e).
[34] RCW 82.87.050.
[35] RCW 82.87.020 (determining Washington capital gains based on net long-term capital gain for federal income tax purposes); Frequently Asked Questions About Washington Capital Gains Tax.
[36] RCW 82.87.040(3).
[37] RCW 82.87.020(1)(c).
[38] If RCW 82.87.020(1)(e) exempts gain from transactions that occurred prior to the effective date of the tax, including deferred gains from pre-effective date installment sales, but there is no corresponding provision in the statute that requires adding back any loss carryforwards that are “exempt” from the tax, which could include both pre-effective date sales and post-effective date sales subject to an exemption. Reading RCW 82.87.020(1) strictly, such losses would be available to offset gains. But the statement in WAC 458-20-300(1)(a) that the tax is imposed only on post-effective date sales or exchanges may be interpreted to require adding back long-term capital loss carryforward from pre-effective date sales.
[39] RCW 82.87.040(3).
[40] RCW 82.87.060(1).
[41] RCW 82.87.060(1).
[42] RCW 82.87.060(1).
[43] RCW 82.87.070.
[44] See RCW 83.100.048.
[45] RCW 82.87.070.
[46] RCW 82.87.070(2)(f).
[47] RCW 82.87.080.
[48] RCW 82.87.080(4)(b)(ii).
[49] RCW 82.87.100(1)(a)(ii).
[50] RCW 82.87.020(10).
[51] RCW 82.87.020(1)(c).
[52] RCW 82.87.100(1)(a).
[53] RCW 82.87.100(1)(a).
[54] RCW 82.87.100.
[55] See In re Lassin's Estate, 33 Wn.2d 163, 165–166 (1949); Ex parte Mullins, 26 Wn.2d 419, 445 (1946).
[56] RCW 82.87.110(1)(a); WAC 458-20-300(2).
[57] RCW 82.87.110(5); WAC 458-20-300(3).
[58] RCW 82.87.110(5); WAC 458-20-300(3); see https://dor.wa.gov/manage-business/my-dor-help/capital-gains-my-dor-help#fileextension (“To request a filing extension, you must first register for a Capital Gains tax account.”).
[59] RCW 82.87.110(1)(b); WAC 458-20-300(2)(e); the return portal is available at https://dor.wa.gov/manage-business/my-dor-help/capital-gains-my-dor-help.
[60] WAC 458-20-300(f).
[61] RCW 82.87.110(6)(a); WAC 458-20-300(5)(a).
[62] RCW82.87.110(6)(b).
[63] RCW 82.87.110(3); RCW 82.32.050; WAC 458-20-300(5)(f); https://dor.wa.gov/file-pay-taxes/late-filing (for interest rates).
[64] WAC 458-20-300(5)(b) (applying a 9% penalty if tax is late, a 19% penalty if tax is not paid “on or before the last day of the month following the due date,” and a 29% penalty if tax is not paid “on or before the last day of the second month following the due date.”)
[65] WAC 458-20-300(5)(c); RCW 82.32.090(2).
[66] WAC 458-20-300(5)(c); RCW 82.32.090(5), (7).
[67] RCW 82.32.105(1).
[68] RCW 82.87.140.