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for state and federal purposes and how the real estate is classified on the grand list. A taxpayer claiming the 40 percent exclusion with respect to real estate that was a residence has the burden of demonstrating that he property was actually converted to nonresidential use. (G) Installment sales Whether the requirement that the asset be held 3 years is satisfied in an installment sale depends upon when title to the asset passes to the buyer. Thus, property purchased in 2010 and sold in 2012 under an installment contract would not be eligible for the 40 percent exclusion even if payments were received in 2013 and after. Reg. §1.5811(21)(B)(ii) - 4 Depreciable Personal Property (A) Adjusted net capital gain income from the sale of depreciable personal property does notqualify for the 40 percent exclusion unless the property sold is farm property. Standing timber also qualifies for the 40 percent exclusion. (B) Farm property includes any tangible personal property used to generate income from an agricultural activity. For example, a baler used to bale hay for sale qualifies, but a baler used to ,bale hay to feed a pet horse does not. A tractor used to mow down vegetation between Christmas trees grown for sale qualifies, but tractor used by a landscaping business,does not. Livestock used in a business for draft, breeding or dairy purposes qualifies for the 40 percent exclusion, (C) Adjusted net capital gain on the sale of most depreciable personal property is not eligible for the 40 percent exclusion. Examples of depreciable personal property the gain on which does not qualify for the 40 percent exclusion include the following: (1) Trade fixtures or business equipment such as restaurant equipment or office furniture; (2) Equipment used for construction, road building and log.ging; (3) Boats, airplanes and mc:>torized vehicles. (D) Property is (/depreciable" if it is a type of property that can be depreciated under the Internal Revenue Code for federal tax purposes. It is irrelevant that such property has not yet been placed in service or that no depreciation expense has yet been taken, Reg. §1.5811(21)(B)(ii) - 5 Stocks or Bonds Publicly Traded on an Exchange and Financial Instruments (A) Adjusted net capital gain on the sale of stocks and bonds that are publicly traded doe~ not • qualify for the 40 percent exclusion. Other financial instruments that are publicly traded, such as futures, options, swaps and other derivative instruments also do not qualify. (B) The sale of stock of a closely held corporation that is not publicly traded qualifies for the 40 percent exclusion. Similarly, adjusted net capital gain from the sale of a membership interest in 4,