Use Schedule D (Form 1040) to report the following.

• The sale or exchange of a capital asset (defined on this page) not reported on another form or schedule.
• Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit.
• Capital gain distributions not reported directly on Form 1040, line 13 (or effectively connected capital gain distributions not reported directly on Form 1040NR, line 14).
• Nonbusiness bad debts.

See Pub. 544 and Pub. 550 for more details. For a comprehensive filled-in example of Schedule D, see Pub. 550.

The 5% tax rate on qualified dividends and net capital gain is reduced to zero. The line on last year's Schedule D Tax Worksheet that reflected the 5% rate has been deleted.

A surviving spouse may be able to exclude up to $500,000 of gain from the sale or exchange of a main home after 2007. Also, the election to suspend the 5-year test period for ownership and use of a main home now can be made by Peace Corps employees and volunteers serving outside the United States. See Sale of Your Home on page D-2.

If you give up your citizenship after June 16, 2008, you may be treated as having sold all your property for its fair market value on the day before you gave up your citizenship. This also applies to long-term U.S. residents who cease to be lawful permanent residents. For details, exceptions, and rules for reporting these deemed sales, see Pub. 519 and Form 8854.