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Instructions for Schedule D (Form 1040)
taxmap/instr/i1040sd-001.htm#en_us_publink_24331id0e106

General Instructions

rule
taxmap/instr/i1040sd-001.htm#en_us_publink_24331id0e111

Other Forms You May Have To File(p1)

rule
Use Form 8949 to report the sale or exchange of a capital asset (defined later) not reported on another form or schedule. Complete all necessary pages of Form 8949 before you complete line 1, 2, 3, 8, 9, or 10 of Schedule D.
Use Form 4797 to report the following.
  1. The sale or exchange of:
    1. Property used in a trade or business;
    2. Depreciable and amortizable property;
    3. Oil, gas, geothermal, or other mineral property; and
    4. Section 126 property.
  2. The involuntary conversion (other than from casualty or theft) of property used in a trade or business and capital assets held for business or profit.
  3. The disposition of noncapital assets other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business.
  4. Ordinary loss on the sale, exchange, or worthlessness of small business investment company (section 1242) stock.
  5. Ordinary loss on the sale, exchange, or worthlessness of small business (section 1244) stock.
  6. Ordinary gain or loss on securities held in connection with your trading business, if you previously made a mark-to-market election. See Traders in Securities, later.
Use Form 4684 to report involuntary conversions of property due to casualty or theft.
Use Form 6781 to report gains and losses from section 1256 contracts and straddles.
Use Form 8824 to report like-kind exchanges. A like-kind exchange occurs when you exchange business or investment property for property of a like kind.
taxmap/instr/i1040sd-001.htm#en_us_publink_24331id0e183

Capital Asset(p1)

rule
Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car, stocks, and bonds are capital assets. A capital asset is any property held by you except the following.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285524

Basis and Recordkeeping(p2)

rule
Basis is the amount of your investment in property for tax purposes. The basis of property you buy is usually its cost. You need to know your basis to figure any gain or loss on the sale or other disposition of the property. You must keep accurate records that show the basis and, if applicable, adjusted basis of your property. Your records should show the purchase price, including commissions; increases to basis, such as the cost of improvements; and decreases to basis, such as depreciation, nondividend distributions on stock, and stock splits.
For more information on basis, see the instructions for column (e), the instructions for Form 8949, and these publications.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285526

Short Term or Long Term(p2)

rule
Report short-term gains or losses in Part I. Report long-term gains or losses in Part II. The holding period for short-term capital gains and losses is 1 year or less. The holding period for long-term capital gains and losses is more than 1 year.
For more information about holding periods, see the instructions for Form 8949.
taxmap/instr/i1040sd-001.htm#en_us_publink_24331id0e249

Capital Gain Distributions(p2)

rule
These distributions are paid by a mutual fund (or other regulated investment company) or real estate investment trust from its net realized long-term capital gains. Distributions of net realized short-term capital gains are not treated as capital gains. Instead, they are included on Form 1099-DIV as ordinary dividends.
Enter on Schedule D, line 13, the total capital gain distributions paid to you during the year, regardless of how long you held your investment. This amount is shown in box 2a of Form 1099-DIV.
If there is an amount in box 2b, include that amount on line 11 of the Unrecaptured Section 1250 Gain Worksheet in these instructions if you complete line 19 of Schedule D.
If there is an amount in box 2c, see Exclusion of Gain on Qualified Small Business (QSB) Stock, later.
If there is an amount in box 2d, include that amount on line 4 of the 28% Rate Gain Worksheet in these instructions if you complete line 18 of Schedule D.
If you received capital gain distributions as a nominee (that is, they were paid to you but actually belong to someone else), report on Schedule D, line 13, only the amount that belongs to you. Attach a statement showing the full amount you received and the amount you received as a nominee. See the Instructions for Schedule B to learn about the requirement for you to file Forms 1099-DIV and 1096.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285527

Sale of Your Home(p2)

rule
Report the sale or exchange of your main home on Form 8949 if:Any gain you cannot exclude is taxable. Generally, if you meet the two following tests, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirement in Test 1).
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Test 1. (p2)
rule
During the 5-year period ending on the date you sold or exchanged your home, you owned it for 2 years or more (the ownership requirement) and lived in it as your main home for 2 years or more (the use requirement).
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Test 2.(p2)
rule
You have not excluded gain on the sale or exchange of another main home during the 2-year period ending on the date of the sale or exchange of your home.
Even if you do not meet one or both of the above two tests, you still can claim an exclusion if you sold or exchanged the home because of a change in place of employment, health, or certain unforeseen circumstances. In this case, the maximum amount of gain you can exclude is reduced.
If your spouse died before the sale or exchange, you can exclude up to $500,000 of gain if:
You can choose to have the 5-year test period for ownership and use in Test 1 suspended during any period you or your spouse serve outside the United States as a Peace Corps volunteer or serve on qualified official extended duty as a member of the uniformed services or Foreign Service of the United States, as an employee of the intelligence community, or outside the United States as an employee of the Peace Corps. This means you may be able to meet Test 1 even if, because of your service, you did not actually use the home as your main home for at least the required 2 years during the 5-year period ending on the date of sale.
You cannot exclude any gain if:
If you have to report the sale or exchange, report it on Form 8949. If the gain or loss is short-term, report it in Part I of Form 8949. If the gain or loss is long-term, report it in Part II of Form 8949. Check box C at the top of this Form 8949.
If you had a gain and can exclude part or all of it, enter H in column (f). Enter the exclusion as a negative number (in parentheses) in column (g). See the instructions for Form 8949, columns (f), (g), and (h). Complete all columns.
If you had a loss but have to report the sale or exchange because you got a Form 1099-S, see Nondeductible Losses, later, for instructions about how to report it.
See Pub. 523 for additional details, including how to figure and report any taxable gain if:
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Partnership Interests(p3)

rule
A sale or other disposition of an interest in a partnership may result in ordinary income, collectibles gain (28% rate gain), or unrecaptured section 1250 gain. For details on 28% rate gain, see the instructions for line 18 of Schedule D. For details on unrecaptured section 1250 gain, see the instructions for line 19 of Schedule D.
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Capital Assets Held for Personal Use(p3)

rule
Generally, gain from the sale or exchange of a capital asset held for personal use is a capital gain. Report it on Form 8949, Part I or Part II, with box C checked. However, if you converted depreciable property to personal use, all or part of the gain on the sale or exchange of that property may have to be recaptured as ordinary income. Use Part III of Form 4797 to figure the amount of ordinary income recapture. The recapture amount is included on line 31 (and line 13) of Form 4797. Do not enter any gain from this property on line 32 of Form 4797. If you are not completing Part III for any other properties, enter N/A on line 32. If the total gain is more than the recapture amount, enter From Form 4797 in column (a) of Part I of Form 8949 (if the transaction is short term) or Part II of Form 8949 (if the transaction is long term), and skip columns (b) and (c). In column (d), enter the excess of the total gain over the recapture amount. Leave columns (e) through (g) blank. Complete column (h). Be sure to check box C at the top of Part I or Part II of this Form 8949 (depending on how long you held the asset).
Loss from the sale or exchange of a capital asset held for personal use is not deductible. But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, you must report the transaction on Form 8949 even though the loss is not deductible. For example, you have a loss on the sale of a vacation home that is not your main home and you received a Form 1099-S for the transaction. Report the transaction in Part I or Part II of Form 8949, depending on how long you owned the home. Complete all columns. Because the loss is not deductible, enter L in column (f). Enter the difference between column (d) and column (e) as a positive amount in column (g). Then complete column (h). For example, if you entered $5,000 in column (d) and $6,000 in column (e), enter $1,000 in column (g). Then enter -0- ($5,000 – $6,000 + $1,000) in column (h). Be sure to check box C at the top of Part I or Part II of this Form 8949 (depending on how long you owned the home).
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Capital Losses(p3)

rule
You can deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately). You may be able to use capital losses that exceed this limit in future years. For details, see the instructions for line 21. Be sure to report all of your capital gains and losses even if you cannot use all of your losses in 2012.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285532

Nondeductible Losses(p3)

rule
Do not deduct a loss from the direct or indirect sale or exchange of property between any of the following.
See Pub. 544 for more details on sales and exchanges between related parties.
Report a transaction that results in a nondeductible loss in Part I or Part II of Form 8949, depending on how long you held the property. Unless you received a Form 1099-B for the sale or exchange, check box C at the top of Part I or Part II of this Form 8949 (depending on how long you owned the property). Complete all columns. Because the loss is not deductible, enter L in column (f). Enter the amount of the nondeductible loss as a positive number in column (g). Complete column (h). See the instructions for Form 8949, columns (f), (g), and (h).

Example 1.(p3)

You sold land you held as an investment for 5 years to your brother for $10,000. Your basis was $15,000. On Part II of Form 8949, check box C at the top. Enter $10,000 on Form 8949, Part II, column (d). Enter $15,000 in column (e). Because the loss is not deductible, enter L in column (f) and $5,000 (the difference between $10,000 and $15,000) in column (g). In column (h), enter -0- ($10,000 − $15,000 + $5,000). If this is your only transaction on this Form 8949, enter $10,000 on Schedule D, line 10, column (d). Enter $15,000 in column (e) and $5,000 in column (g). In column (h), enter -0-($10,000 − $15,000 + $5,000).

Example 2.(p3)

You received a Form 1099-B showing proceeds (sales price) of $1,000 and a basis of $5,000. Box 2b on Form 1099-B is checked, so your loss of $4,000 ($1,000 - $5,000) is not allowed. On the top of Form 8949, check box A or box B in Part I or Part II (whichever applies). Enter $1,000 in column (d) and $5,000 in column (e). Because the loss is not deductible, enter L in column (f) and $4,000 (the difference between $1,000 and $5,000) in column (g). In column (h), enter -0- ($1,000 - $5,000 + $4,000).
taxmap/instr/i1040sd-001.htm#en_us_publink1000285534
At-risk rules.(p3)
rule
If you disposed of (a) an asset used in an activity to which the at-risk rules apply or (b) any part of your interest in an activity to which the at-risk rules apply, and you have amounts in the activity for which you are not at risk, see the Instructions for Form 6198.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285535
Passive activity rules.(p4)
rule
If the loss is allowable under the at-risk rules, it then may be subject to the passive activity rules. See Form 8582 and its instructions for details on reporting capital gains and losses from a passive activity.
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Items for Special Treatment(p4)

rule
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Wash Sales(p4)

rule
A wash sale occurs when you sell or otherwise dispose of stock or securities (including a contract or option to acquire or sell stock or securities) at a loss and, within 30 days before or after the sale or disposition, you:
  1. Buy substantially identical stock or securities,
  2. Acquire substantially identical stock or securities in a fully taxable trade,
  3. Enter into a contract or option to acquire substantially identical stock or securities, or
  4. Acquire substantially identical stock or securities for your individual retirement arrangement (IRA) or Roth IRA.
You cannot deduct losses from wash sales unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities. The basis of the substantially identical property (or contract or option to acquire such property) is its cost increased by the disallowed loss (except in the case of (4) above).
If you received a Form 1099-B (or substitute statement), box 5 of that form will show any nondeductible wash sale loss if:However, you cannot deduct a loss from a wash sale even if it is not reported on Form 1099-B (or substitute statement). For more details on wash sales, see Pub. 550.
Report a wash sale transaction in Part I or Part II (depending on how long you owned the stock or securities) of Form 8949 with the appropriate box (A, B, or C) checked. Complete all columns. Enter "W" in column (f). Enter as a positive number in column (g) the amount of the loss not allowed. See the instructions for Form 8949, columns (f), (g), and (h).
taxmap/instr/i1040sd-001.htm#en_us_publink1000285547

Traders in Securities(p5)

rule
You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. To be engaged in business as a trader in securities, all of the following statements must be true.
The following facts and circumstances should be considered in determining if your activity is a business.
You are considered an investor, and not a trader, if your activity does not meet the above definition of a business. It does not matter whether you call yourself a trader or a day trader.
Like an investor, a trader must report each sale of securities (taking into account commissions and any other costs of acquiring or disposing of the securities) on Form 8949 or on an attached statement containing all the same information for each sale in a similar format. However, if a trader previously made the mark-to-market election (explained next), each transaction is reported in Part II of Form 4797 instead of on Form 8949. Regardless of whether a trader reports his or her gains and losses on Form 8949 or Form 4797, the gain or loss from the disposition of securities is not taken into account when figuring net earnings from self-employment on Schedule SE. See the Instructions for Schedule SE for an exception that applies to section 1256 contracts.
The limitation on investment interest expense that applies to investors does not apply to interest paid or incurred in a trading business. A trader reports interest expense and other expenses (excluding commissions and other costs of acquiring or disposing of securities) from a trading business on Schedule C (instead of Schedule A).
A trader also may hold securities for investment. The rules for investors generally will apply to those securities. Allocate interest and other expenses between your trading business and your investment securities.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285548

Mark-To-Market Election for Traders(p5)

rule
A trader may make an election under section 475(f) to report all gains and losses from securities held in connection with a trading business as ordinary income (or loss), including those from securities held at the end of the year. Securities held at the end of the year are marked-to-market by treating them as if they were sold (and reacquired) for fair market value on the last business day of the year. Generally, the election must be made by the due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. To be effective for 2012, the election must have been made by April 17, 2012.
Starting with the year the election becomes effective, a trader reports all gains and losses from securities held in connection with the trading business, including securities held at the end of the year, in Part II of Form 4797. If you previously made the election, see the Instructions for Form 4797. For details on making the mark-to-market election for 2013, see Pub. 550 or Rev. Proc. 99-17, 1999-1 C.B. 503. You can find Rev. Proc. 99-17 starting on the bottom of page 52 of Internal Revenue Bulletin 1999-7 at www.irs.gov/pub/irs-irbs/irb99-07.pdf.
If you hold securities for investment, you must identify them as such in your records on the day you acquired them (for example, by holding the securities in a separate brokerage account). Securities held for investment are not marked-to-market.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285549

Short Sales(p5)

rule
A short sale is a contract to sell property you borrowed for delivery to a buyer. At a later date, you either buy substantially identical property and deliver it to the lender or deliver property that you held but did not want to transfer at the time of the sale.

Example.(p5)

You think the value of XYZ stock will drop. You borrow 10 shares from your broker and sell them for $100. This is a short sale. You later buy 10 shares for $80 and deliver them to your broker to close the short sale. Your gain is $20 ($100 − $80).
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Holding period.(p5)
rule
Usually, your holding period is the amount of time you actually held the property eventually delivered to the lender to close the short sale. However, your gain when closing a short sale is short term if you (a) held substantially identical property for 1 year or less on the date of the short sale, or (b) acquired property substantially identical to the property sold short after the short sale but on or before the date you close the short sale. If you held substantially identical property for more than 1 year on the date of a short sale, any loss realized on the short sale is a long-term capital loss, even if the property used to close the short sale was held 1 year or less.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285552
Reporting a short sale.(p5)
rule
Report any short sale on Form 8949 in the year it closes.
If a short sale closed in 2012 but you did not get a 2012 Form 1099-B (or substitute statement) for it because you entered into it before 2011, report it in Part I or Part II (whichever applies) of a Form 8949 with box C checked on that page. In column (a), enter (for example) 100 sh. XYZ Co.–2010 short sale closed. Fill in the other columns according to their instructions. Report the short sale the same way if you received a 2012 Form 1099-B (or substitute statement) that does not show proceeds (sales price).
taxmap/instr/i1040sd-001.htm#en_us_publink1000285553

Gain or Loss From Options(p5)

rule
Report on Form 8949 gain or loss from the closing or expiration of an option that is not a section 1256 contract but is a capital asset in your hands. If an option you purchased expired, enter the expiration date in column (c) and enter EXPIRED in column (d). If an option that was granted (written) expired, enter the expiration date in column (b) and enter EXPIRED in column (e). Fill in the other columns according to their instructions. See Pub. 550 for details.
If a call option you sold was exercised and the option premium you received was not reflected in the proceeds (sales price) shown on the Form 1099-B (or substitute statement) you received, enter the premium as a positive number in column (g) of Form 8949. Enter E in column (f).

Example.(p6)

For $10, you sold Joe an option to buy one share of XYZ stock for $80. Joe later exercised the option. The Form 1099-B you get shows the proceeds to be $80. Enter $80 in column (d) of Form 8949. Enter E in column (f) and $10 in column (g). Complete the other columns according to the instructions.
taxmap/instr/i1040sd-001.htm#en_us_publink_24331id0e434

Undistributed Capital Gains(p6)

rule
Include on Schedule D, line 11, the amount from box 1a of Form 2439. This represents your share of the undistributed long-term capital gains of the regulated investment company (including a mutual fund) or real estate investment trust.
If there is an amount in box 1b, include that amount on line 11 of the Unrecaptured Section 1250 Gain Worksheet if you complete line 19 of Schedule D.
If there is an amount in box 1c, see Exclusion of Gain on Qualified Small Business (QSB) Stock, later.
If there is an amount in box 1d, include that amount on line 4 of the 28% Rate Gain Worksheet if you complete line 18 of Schedule D.
Include on Form 1040, line 71, or Form 1040NR, line 67, the tax paid as shown in box 2 of Form 2439. Also check the box for Form 2439. Add to the basis of your stock the excess of the amount included in income over the amount of the credit for the tax paid. See Pub. 550 for details.
taxmap/instr/i1040sd-001.htm#en_us_publink_24331id0e465

Installment Sales(p6)

rule
If you sold property (other than publicly traded stocks or securities) at a gain and you will receive a payment in a tax year after the year of sale, you generally must report the sale on the installment method unless you elect not to. Use Form 6252 to report the sale on the installment method. Also use Form 6252 to report any payment received in 2012 from a sale made in an earlier year that you reported on the installment method.
To elect out of the installment method, report the full amount of the gain on Form 8949 on a timely filed return (including extensions) for the year of the sale. If your original return was filed on time, you can make the election on an amended return filed no later than 6 months after the due date of your return (excluding extensions). Write Filed pursuant to section 301.9100-2 at the top of the amended return.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285555

Demutualization of Life Insurance Companies(p6)

rule
Demutualization of a life insurance company occurs when a mutual life insurance company changes to a stock company. If you were a policyholder or annuitant of the mutual company, you may have received either stock in the stock company or cash in exchange for your equity interest in the mutual company. The basis of your equity interest in the mutual company is considered to be zero.
If the demutualization transaction qualifies as a tax-free reorganization, no gain is recognized on the exchange of your equity interest in the mutual company for stock. The company can advise you if the transaction is a tax-free reorganization. Because the basis of your equity interest in the mutual company is considered to be zero, your basis in the stock received is zero. Your holding period for the new stock includes the period you held an equity interest in the mutual company. If you received cash in exchange for your equity interest, you must recognize a capital gain in an amount equal to the cash received. If you held the equity interest for more than 1 year, report the gain as a long-term capital gain in Part II of Form 8949. If you held the equity interest for 1 year or less, report the gain as a short-term capital gain in Part I of Form 8949. Be sure the appropriate box is checked at the top of Form 8949.
If the demutualization transaction does not qualify as a tax-free reorganization, you must recognize a capital gain in an amount equal to the cash and fair market value of the stock received. If you held the equity interest for more than 1 year, report the gain as a long-term capital gain in Part II of Form 8949. If you held the equity interest for 1 year or less, report the gain as a short-term capital gain in Part I of Form 8949. Be sure the appropriate box is checked at the top of Form 8949. Your holding period for the new stock begins on the day after you received the stock.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285579

Small Business (Section 1244) Stock(p6)

rule
Report an ordinary loss from the sale, exchange, or worthlessness of small business (section 1244) stock on Form 4797. However, if the total loss is more than the maximum amount that can be treated as an ordinary loss, also report the transaction on Form 8949 as follows.
  1. In column (a), enter Capital portion of section 1244 stock loss.
  2. Complete columns (b) and (c) as you normally would.
  3. In column (d), enter the entire sales price of the stock sold.
  4. In column (e), enter the entire basis of the stock sold.
  5. Enter S in column (f). See the instructions for Form 8949, columns (f), (g), and (h).
  6. In column (g), enter the loss you claimed on Form 4797 for this transaction. Enter it as a positive number.
  7. Complete column (h) according to its instructions.
Report the transaction in Part I or Part II of Form 8949 (depending on how long you held the stock) with the appropriate box (A, B, or C) checked.

Example.(p6)

You sold section 1244 stock for $1,000. Your basis was $60,000. You had held the stock for 3 years. You can claim $50,000 of your loss as an ordinary loss on Form 4797. To claim the rest of the loss on Form 8949, check the appropriate box at the top. Enter $1,000 on Form 8949, Part II, column (d). Enter $60,000 in column (e). Enter S in column (f) and $50,000 (the ordinary loss claimed on Form 4797) in column (g). In column (h), enter ($9,000) ($1,000 − $60,000 + $50,000). Put it in parentheses to show it is a negative amount.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285556

Exclusion of Gain on Qualified Small Business (QSB) Stock(p7)

rule
Section 1202 allows for an exclusion of up to 50% of the eligible gain on the sale or exchange of QSB stock. The section 1202 exclusion applies only to QSB stock held for more than 5 years. The exclusion can be up to 60% for certain empowerment zone business stock. See Empowerment Zone Business Stock, later.
To be QSB stock, the stock must meet all of the following tests.
  1. It must be stock in a C corporation (that is, not S corporation stock).
  2. It must have been originally issued after August 10, 1993.
  3. As of the date the stock was issued, the corporation was a domestic C corporation with total gross assets of $50 million or less (a) at all times after August 9, 1993, and before the stock was issued, and (b) immediately after the stock was issued. Gross assets include those of any predecessor of the corporation. All corporations that are members of the same parent-subsidiary controlled group are treated as one corporation.
  4. You must have acquired the stock at its original issue (either directly or through an underwriter), either in exchange for money or other property or as pay for services (other than as an underwriter) to the corporation. In certain cases, you may meet this test if you acquired the stock from another person who met the test (such as by gift or inheritance) or through a conversion or exchange of QSB stock you held.
  5. During substantially all the time you held the stock:
    1. The corporation was a C corporation,
    2. At least 80% of the value of the corporation's assets were used in the active conduct of one or more qualified businesses (defined next), and
    3. The corporation was not a foreign corporation, DISC, former DISC, regulated investment company, real estate investment trust, REMIC, FASIT, cooperative, or a corporation that has made (or that has a subsidiary that has made) a section 936 election.
taxtip
SSBIC. A specialized small business investment company (SSBIC) is treated as having met test 5b.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285558
Definition of qualified business.(p7)
rule
A qualified business is any business that is not one of the following.
For more details about limits and additional requirements that may apply, see Pub. 550 or section 1202.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285559

Empowerment Zone Business Stock(p7)

rule
You generally can exclude up to 60% of your gain if you meet the following additional requirements.
  1. The stock you sold or exchanged was stock in a corporation that qualified as an empowerment zone business during substantially all of the time you held the stock.
  2. You acquired the stock after December 21, 2000.
Requirement 1 will still be met if the corporation ceased to qualify after the 5-year period that began on the date you acquired the stock. However, the gain that qualifies for the 60% exclusion cannot be more than the gain you would have had if you had sold the stock on the date the corporation ceased to qualify.
For more information about empowerment zone businesses, see section 1397C.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285560

Pass-Through Entities(p7)

rule
If you held an interest in a pass-through entity (a partnership, S corporation, or mutual fund or other regulated investment company) that sold QSB stock, to qualify for the exclusion you must have held the interest on the date the pass-through entity acquired the QSB stock and at all times thereafter until the stock was sold.
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How To Report(p7)

rule
Report the sale or exchange of the QSB stock on Form 8949, Part II, with the appropriate box checked, as you would if you were not taking the exclusion. Then enter Q in column (f) and enter the amount of the excluded gain as a negative number in column (g). Put it in parentheses to show it is negative. See the instructions for Form 8949, columns (f), (g), and (h). Complete all remaining columns. If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet; if you excluded 60% of the gain, enter 2/3 of the exclusion.
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Gain from Form 1099-DIV.(p7)
rule
If you received a Form 1099-DIV with a gain in box 2c, part or all of that gain (which is also included in box 2a) may be eligible for the section 1202 exclusion. In column (a) of Form 8949, Part II, enter the name of the corporation whose stock was sold. In column (f), enter Q and in column (g) enter the amount of the excluded gain as a negative number. See the instructions for Form 8949, columns (f), (g), and (h). If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet; if you excluded 60% of the gain, enter 2/3 of the exclusion.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285563
Gain from Form 2439.(p7)
rule
If you received a Form 2439 with a gain in box 1c, part or all of that gain (which is also included in box 1a) may be eligible for the section 1202 exclusion. In column (a) of Form 8949, Part II, enter the name of the corporation whose stock was sold. In column (f), enter Q and in column (g) enter the amount of the excluded gain as a negative number. See the instructions for Form 8949, columns (f), (g), and (h). If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28% Rate Gain Worksheet; if you excluded 60% of the gain, enter 2/3 of the exclusion.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285564
Gain from an installment sale of QSB stock.(p8)
rule
If all payments are not received in the year of sale, a sale of QSB stock that is not traded on an established securities market generally is treated as an installment sale and is reported on Form 6252. Figure the allowable section 1202 exclusion for the year by multiplying the total amount of the exclusion by a fraction, the numerator of which is the amount of eligible gain to be recognized for the tax year and the denominator of which is the total amount of eligible gain. In column (a) of Form 8949, Part II, enter the name of the corporation whose stock was sold. In column (f), enter Q and in column (g) enter the amount of the allowable exclusion for the year as a negative number. See the instructions for Form 8949, columns (f), (g), and (h). If you are completing line 18 of Schedule D, enter as a positive number the amount of your allowable exclusion for the year on line 2 of the 28% Rate Gain Worksheet; if you excluded 60% of the gain, enter 2/3 of the allowable exclusion for the year.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285565
Alternative minimum tax.(p8)
rule
You must enter 7% of your allowable exclusion for the year on line 13 of Form 6251.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285566

Rollover of Gain From QSB Stock(p8)

rule
If you sold QSB stock (defined earlier) that you held for more than 6 months, you can elect to postpone gain if you buy other QSB stock during the 60-day period that began on the date of the sale. A pass-through entity also can make the election to postpone gain. The benefit of the postponed gain applies to your share of the entity's postponed gain if you held an interest in the entity for the entire period the entity held the QSB stock. If a pass-through entity sold QSB stock held for more than 6 months and you held an interest in the entity for the entire period the entity held the stock, you also can elect to postpone gain if you, rather than the pass-through entity, buy the replacement QSB stock within the 60-day period. If you were a partner in a partnership that sold or bought QSB stock, see box 11 of the Schedule K-1 (Form 1065) sent to you by the partnership and Regulations section 1.1045-1.
You must recognize gain to the extent the sale proceeds are more than the cost of the replacement stock. Reduce the basis of the replacement stock by any postponed gain.
You must make the election no later than the due date (including extensions) for filing your tax return for the tax year in which the QSB stock was sold. If your original return was filed on time, you can make the election on an amended return filed no later than 6 months after the due date of your return (excluding extensions). Write Filed pursuant to section 301.9100-2 at the top of the amended return.
To make the election, report the sale in Part I or Part II (depending on how long you owned the stock) of Form 8949 as you would if you were not making the election. Then enter R in column (f). Enter the amount of the postponed gain as a negative number in column (g). Put it in parentheses to show it is negative. See the instructions for Form 8949, columns (f), (g), and (h). Complete all remaining columns.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285569

Exclusion of Gain From DC Zone Assets(p8)

rule
If you sold or exchanged a District of Columbia Enterprise Zone (DC Zone) asset that you acquired after 1997 and held for more than 5 years, you may be able to exclude the amount of qualified capital gain that you would otherwise include in income. The exclusion applies to an interest in, or property of, certain businesses operating in the District of Columbia.
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DC Zone asset.(p8)
rule
A DC Zone asset is any of the following.
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Qualified capital gain.(p8)
rule
Qualified capital gain is any gain recognized on the sale or exchange of a DC Zone asset that is a capital asset or property used in a trade or business. It does not include any of the following gains.
See section 1400B for more details.
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How to report.(p8)
rule
Report the sale or exchange on Form 8949, Part II, as you would if you were not taking the exclusion. Then enter X in column (f). Enter the amount of the exclusion as a negative number in column (g). Put it in parentheses to show it is negative. See the instructions for Form 8949, columns (f), (g), and (h). Complete all remaining columns.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285573

Exclusion of Gain From Qualified Community Assets(p8)

rule
If you sold or exchanged a qualified community asset that you acquired after 2001 and before 2010 and held for more than 5 years, you may be able to exclude the qualified capital gain that you would otherwise include in income. The exclusion applies to an interest in, or property of, certain renewal community businesses.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285574
Qualified community asset.(p8)
rule
A qualified community asset is any of the following.
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Qualified capital gain.(p8)
rule
Qualified capital gain is any gain recognized on the sale or exchange of a qualified community asset but does not include any of the following.
See section 1400F for more details and special rules.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285576
How to report.(p9)
rule
Report the sale or exchange on Form 8949, Part II, with the appropriate box checked, as you would if you were not taking the exclusion. Then enter X in column (f) and enter the amount of the exclusion as a negative number in column (g). Put it in parentheses to show it is negative. See the instructions for Form 8949, columns (f), (g), and (h). Complete all remaining columns.
taxmap/instr/i1040sd-001.htm#en_us_publink1000285577

Rollover of Gain From Publicly Traded Securities(p9)

rule
You can postpone all or part of any gain from the sale of publicly traded securities by buying common stock or a partnership interest in a specialized small business investment company during the 60-day period that began on the date of the sale. See Pub. 550. Also see the instructions for Form 8949, columns (f), (g), and (h).
taxmap/instr/i1040sd-001.htm#en_us_publink1000285578

Rollover of Gain From Stock Sold to ESOPs or Certain Cooperatives(p9)

rule
You can postpone all or part of any gain from the sale of qualified securities, held for at least 3 years, to an employee stock ownership plan (ESOP) or eligible worker-owned cooperative, if you buy qualified replacement property. See Pub. 550. Also see the instructions for Form 8949, columns (f), (g), and (h).