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Ezel / Tax Rulings / CT
CT Ruling 89-33 Capital Gains, Dividends and Interest Tax 1989-08-01

Was gain from employees' forced stock sales in corporate takeovers subject to Connecticut's former capital-gains tax?

Short answer: Yes. Because the forced-sale gains were taxable for federal income-tax purposes, the ruling also treated them as Connecticut capital gains under the former dividends, interest income, and capital gains tax. The ruling is obsolete.

Apply this to your situation

This page answers the general question as of 1989. Ezel answers yours, under current Connecticut tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This 1989 Connecticut Department of Revenue Services Ruling is not current. The official page says it was obsoleted by Announcement 94(2), so it is provided only as historical reference and should not be used as current authority. It addressed Connecticut's former dividends, interest income, and capital gains tax and employee stock forced sales under the law then in effect. This summary is informational only and is not legal or tax advice. Consult licensed federal and Connecticut tax professionals about current stock-sale treatment.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

Gains from employees' forced sales of stock during corporate takeovers were subject to Connecticut's former dividends, interest income, and capital gains tax.

The ruling tied the Connecticut result to federal tax treatment: because the forced-sale gains were taxed for federal purposes, they were also taxed as Connecticut capital gains.

The official archive says this ruling was obsoleted by Announcement 94(2).

What this means for you

The historical ruling did not create an exception because the employee had no choice about selling. Federal recognition of the gain controlled the state result under the former tax.

Common questions

Were forced-sale gains taxable? Yes.

Why? They were realized and taxed for federal income-tax purposes.

Did the employee's lack of choice create an exemption? No.

Citations and references

  • No statutory section number was cited in the ruling text.

Source

Original ruling text

Ruling 89-33, Capital Gains, Dividends and Interest Tax

This Ruling has been obsoleted by AN 94(2)

Ruling 89-33

Capital Gains, Dividends and Interest Tax

You have questioned whether the forced sale of stock held by employees in corporations involved in corporate takeovers is subject to the Dividends, Interest Income and Capital Gains Tax.

The Connecticut Dividends, Interest Income and Capital Gains Tax is imposed on those gains realized for Federal income tax purposes. Since the gains in the forced sale of stock are taxed for Federal tax purposes, they are also taxed as Connecticut capital gains.

While I am sympathetic to the position that employees find themselves in, this Department is bound by statute to include these gains in the taxation of capital gains.

TIMOTHY F. BANNON
COMMISSIONER

August 1, 1989

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