Instructions for IRS Form 1120s Schedule D - Capital Gains and Losses and Built-In Gains 2017

January 1, 2017 "Instructions For Schedule D (form 1120s) - Capital Gains And Losses And Built-in Gains" contain the updated filing procedures for the IRS-issued Form 1120S. Download your copy of the instructions by clicking the link below.

IRS Form 1120S is a tax form issued by the United States Internal Revenue Service.

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2017
Department of the Treasury
Internal Revenue Service
Instructions for Schedule D
(Form 1120S)
Capital Gains and Losses and Built-in Gains
Capital Assets
Capital gain distributions.
Section references are to the Internal Revenue
Code unless otherwise noted.
Tax on built-in gains. See
Part III.
Each item of property the corporation
Built-in Gains
Tax.
Future Developments
held (whether or not connected with its
trade or business) is a capital asset
Other Forms the
For the latest information about
except the following.
developments related to Schedule D
Corporation May Have To
Stock in trade or other property
(Form 1120S) and its instructions, such
File
included in inventory or held mainly for
as legislation enacted after they were
sale to customers. However, see the
Use Form 8949 to report the sale or
published, go to IRS.gov/Form1120S.
Note below.
exchange of a capital asset (defined
Accounts or notes receivable
What’s New
later) not reported on another form or
acquired in the ordinary course of the
schedule. Complete all necessary
trade or business for services rendered
Built-in gains tax rate for fiscal year
pages of Form 8949 before you
or from the sale of stock in trade or other
filers. Public Law 115–97 reduced the
complete line 1b, 2, 3, 8b, 9, or 10 of
property included in inventory or held
highest corporate tax rate from 35% to
Schedule D. See Lines 1a and
mainly for sale to customers.
21%, effective for tax years beginning
8a—Transactions Not Reported on
Depreciable or real property used in
after December 31, 2017. However,
Form 8949, later, for more information
the trade or business, even if it is fully
under section 15, corporations with
about when to use Form 8949.
depreciated.
fiscal tax years beginning before
Certain copyrights; literary, musical,
Use Form 4797, Sales of Business
January 1, 2018, and ending after
or artistic compositions; letters or
Property, to report the following.
December 31, 2017, figure and
memoranda; or similar property.
The sale, exchange, or distribution of
apportion their built-in gains tax by
However, see the Note below.
property used in a trade or business.
blending the 35% rate in effect before
For dispositions after 2017, certain
The sale, exchange, or distribution of
January 1, 2018, with the 21% rate in
patents, inventions, models, or designs
depreciable and amortizable property.
effect after December 31, 2017. See the
(whether or not patented); secret
The sale or other disposition of
instructions for line
21.
formulas or processes; or similar
securities or commodities held in
Capital assets. For dispositions after
property. See section 1221(a)(3) as
connection with a trading business, if
2017, certain patents, inventions,
revised by Public Law 115-97, section
the corporation made a mark-to-market
models, or designs; secret formulas or
13314.
election.
processes; or similar property are not
U.S. Government publications,
The involuntary conversion (from
capital assets. See
Capital
Assets.
including the Congressional Record,
other than casualty or theft) of property
that the corporation received from the
used in the corporation's trade or
Rollover of empowerment zone as-
government, other than by purchase at
business and capital assets held in
sets. The ability to roll over the gain
the normal sales price, or that the
connection with a trade or business or a
from the sale of qualified empowerment
corporation got from another taxpayer
transaction entered into for profit.
zone assets was extended and may
who had received it in a similar way, if
The disposition of noncapital assets
apply to sales made in 2017. See
the corporation's basis is determined by
other than inventory or property held
Rollover of gain from empowerment
reference to the previous owner's basis.
primarily for sale to customers in the
zone
assets.
Certain commodities derivative
ordinary course of the corporation's
General Instructions
financial instruments held by a dealer in
trade or business.
connection with its dealer activities.
Use Form 4684, Casualties and
Certain identified hedging
Purpose of Schedule
Thefts, to report involuntary conversions
transactions entered into in the normal
of property due to casualty or theft.
Use Schedule D to report the following.
course of the trade or business.
The overall capital gains and losses
Supplies regularly used in the trade
Use Form 6781, Gains and Losses
from transactions reported on Form
or business.
From Section 1256 Contracts and
8949, Sales and Other Dispositions of
Straddles, to report gains and losses
For details, see section 1221(a).
Capital Assets.
from section 1256 contracts and
Certain transactions the corporation
straddles.
Note. The corporation can elect to treat
doesn't have to report on Form 8949.
as capital assets certain musical
Additional information. For more
Capital gains from Form 6252,
compositions or copyrights it sold or
information, see Pub. 544, Sales and
Installment Sale Income.
exchanged. See section 1221(b)(3) and
Other Dispositions of Assets, and Pub.
Capital gains and losses from Form
Pub. 550 for details.
550, Investment Income and Expenses
8824, Like-Kind Exchanges.
(Including Capital Gains and Losses).
Gains on distributions to
shareholders of appreciated capital
assets.
Mar 25, 2018
Cat. No. 64419L
2017
Department of the Treasury
Internal Revenue Service
Instructions for Schedule D
(Form 1120S)
Capital Gains and Losses and Built-in Gains
Capital Assets
Capital gain distributions.
Section references are to the Internal Revenue
Code unless otherwise noted.
Tax on built-in gains. See
Part III.
Each item of property the corporation
Built-in Gains
Tax.
Future Developments
held (whether or not connected with its
trade or business) is a capital asset
Other Forms the
For the latest information about
except the following.
developments related to Schedule D
Corporation May Have To
Stock in trade or other property
(Form 1120S) and its instructions, such
File
included in inventory or held mainly for
as legislation enacted after they were
sale to customers. However, see the
Use Form 8949 to report the sale or
published, go to IRS.gov/Form1120S.
Note below.
exchange of a capital asset (defined
Accounts or notes receivable
What’s New
later) not reported on another form or
acquired in the ordinary course of the
schedule. Complete all necessary
trade or business for services rendered
Built-in gains tax rate for fiscal year
pages of Form 8949 before you
or from the sale of stock in trade or other
filers. Public Law 115–97 reduced the
complete line 1b, 2, 3, 8b, 9, or 10 of
property included in inventory or held
highest corporate tax rate from 35% to
Schedule D. See Lines 1a and
mainly for sale to customers.
21%, effective for tax years beginning
8a—Transactions Not Reported on
Depreciable or real property used in
after December 31, 2017. However,
Form 8949, later, for more information
the trade or business, even if it is fully
under section 15, corporations with
about when to use Form 8949.
depreciated.
fiscal tax years beginning before
Certain copyrights; literary, musical,
Use Form 4797, Sales of Business
January 1, 2018, and ending after
or artistic compositions; letters or
Property, to report the following.
December 31, 2017, figure and
memoranda; or similar property.
The sale, exchange, or distribution of
apportion their built-in gains tax by
However, see the Note below.
property used in a trade or business.
blending the 35% rate in effect before
For dispositions after 2017, certain
The sale, exchange, or distribution of
January 1, 2018, with the 21% rate in
patents, inventions, models, or designs
depreciable and amortizable property.
effect after December 31, 2017. See the
(whether or not patented); secret
The sale or other disposition of
instructions for line
21.
formulas or processes; or similar
securities or commodities held in
Capital assets. For dispositions after
property. See section 1221(a)(3) as
connection with a trading business, if
2017, certain patents, inventions,
revised by Public Law 115-97, section
the corporation made a mark-to-market
models, or designs; secret formulas or
13314.
election.
processes; or similar property are not
U.S. Government publications,
The involuntary conversion (from
capital assets. See
Capital
Assets.
including the Congressional Record,
other than casualty or theft) of property
that the corporation received from the
used in the corporation's trade or
Rollover of empowerment zone as-
government, other than by purchase at
business and capital assets held in
sets. The ability to roll over the gain
the normal sales price, or that the
connection with a trade or business or a
from the sale of qualified empowerment
corporation got from another taxpayer
transaction entered into for profit.
zone assets was extended and may
who had received it in a similar way, if
The disposition of noncapital assets
apply to sales made in 2017. See
the corporation's basis is determined by
other than inventory or property held
Rollover of gain from empowerment
reference to the previous owner's basis.
primarily for sale to customers in the
zone
assets.
Certain commodities derivative
ordinary course of the corporation's
General Instructions
financial instruments held by a dealer in
trade or business.
connection with its dealer activities.
Use Form 4684, Casualties and
Certain identified hedging
Purpose of Schedule
Thefts, to report involuntary conversions
transactions entered into in the normal
of property due to casualty or theft.
Use Schedule D to report the following.
course of the trade or business.
The overall capital gains and losses
Supplies regularly used in the trade
Use Form 6781, Gains and Losses
from transactions reported on Form
or business.
From Section 1256 Contracts and
8949, Sales and Other Dispositions of
Straddles, to report gains and losses
For details, see section 1221(a).
Capital Assets.
from section 1256 contracts and
Certain transactions the corporation
straddles.
Note. The corporation can elect to treat
doesn't have to report on Form 8949.
as capital assets certain musical
Additional information. For more
Capital gains from Form 6252,
compositions or copyrights it sold or
information, see Pub. 544, Sales and
Installment Sale Income.
exchanged. See section 1221(b)(3) and
Other Dispositions of Assets, and Pub.
Capital gains and losses from Form
Pub. 550 for details.
550, Investment Income and Expenses
8824, Like-Kind Exchanges.
(Including Capital Gains and Losses).
Gains on distributions to
shareholders of appreciated capital
assets.
Mar 25, 2018
Cat. No. 64419L
Items for Special
Gain from installment sales. If the
Nonrecognition of gain on sale of
Treatment
corporation sold property at a gain and it
stock to an employee stock owner-
will receive a payment in a tax year after
ship plan (ESOP) or an eligible co-
Note. For more information, see Pub.
the year of sale, it generally must report
operative. See section 1042 and
544.
the sale on the installment method
Temporary Regulations section
Loss from a sale or exchange be-
unless it elects not to. However, the
1.1042-1T for rules under which the
tween the corporation and a related
installment method may not be used to
corporation can elect not to recognize
person. Except for distributions in
report sales of stock or securities traded
gain from the sale of certain stock to an
complete liquidation of a corporation, no
on an established securities market.
ESOP or an eligible cooperative.
loss is allowed from the sale or
Use Form 6252 to report the sale on
Bonds and other debt instruments.
exchange of property between the
the installment method. Also use Form
See Pub. 550.
corporation and certain related persons.
6252 to report any payment received
See section 267.
Gain on disposition of market dis-
during the tax year from a sale made in
count bonds. In general, a capital gain
Loss from a wash sale. A wash sale
an earlier year that was reported on the
upon the disposition of a market
occurs if the corporation acquires (by
installment method. Enter gain from the
discount bond is treated as interest
purchase or exchange), or has a
installment sales on Schedule D, line 4
income to the extent of accrued market
contract or option to acquire,
or line 11, as applicable. See the
discount as of the date of disposition.
substantially identical stock or securities
Instructions for Form 6252.
See sections 1276 through 1278 and
within 30 days before or after the date of
To elect out of the installment
Pub. 550 for more information on market
the sale or exchange. The corporation
method, report the full amount of the
discount. See the Instructions for Form
can’t deduct a loss from a wash sale of
gain on Form 8949 for the year of the
8949 for detailed information about how
stock or securities (including contracts
sale on a return filed by the due date
to report the disposition of a market
or options to acquire or sell stock or
(including extensions). If the original
discount bond.
securities) unless the corporation is a
return was filed on time without making
dealer in stock or securities and the loss
Contingent payment debt instru-
the election, the corporation can make
was sustained in a transaction made in
ments. Any gain recognized on the
the election on an amended return filed
the ordinary course of the corporation's
sale, exchange, or retirement of a
no later than 6 months after the original
trade or business. For more information
contingent payment debt instrument
due date (excluding extensions). Enter
on wash sales, see section 1091.
subject to the noncontingent bond
“Filed pursuant to section 301.9100-2”
method is generally treated as interest
The wash sale rules don’t apply to a
at the top of the amended return.
income rather than as capital gain. In
redemption of shares in a floating-NAV
Gain or loss on an option to buy or
certain situations, all or a portion of a
(net asset value) money market fund.
sell property. See sections 1032 and
loss recognized on the sale, exchange,
Report the transaction as the
1234 for the rules that apply to a
or retirement of a contingent payment
corporation otherwise would on Form
purchaser or grantor of an option or a
debt instrument subject to the
8949, Part I or II (depending on how
securities futures contract (as defined in
noncontingent bond method may be
long the corporation owned the stock or
section 1234B). See Pub. 550 for
treated as an ordinary loss rather than
securities). Check the appropriate box.
details.
as a capital loss. See Regulations
Enter "W" in column (f). Enter the
section 1.1275-4(b) and Pub. 550 for
Gain or loss from a short sale of
nondeductible loss as a positive number
more information on contingent
property. Report the gain or loss to the
in column (g). Complete all remaining
payment debt instruments subject to the
extent that the property used to close
columns. See the Instructions for Form
noncontingent bond method. See the
the short sale is considered a capital
8949.
Instructions for Form 8949 for detailed
asset in the hands of the taxpayer.
Gain on distributions of appreciated
information about how to report the
Report any short sale on Form 8949 in
property. Generally, gain (but not loss)
disposition of a contingent payment
the year the sale closes.
is recognized on a nonliquidating
debt instrument.
If a short sale closed in 2017 but the
distribution of appreciated property to
corporation didn’t get a 2017 Form
Nonbusiness bad debts. A
the extent that the property's fair market
1099-B (or substitute statement) for it
nonbusiness bad debt must be treated
value (FMV) exceeds its adjusted basis.
because the corporation entered into it
as a short-term capital loss and can be
See section 311.
before 2011, report it on Form 8949 in
deducted only in the year the debt
Part I with box C checked or Part II with
Gain or loss on distribution of prop-
becomes totally worthless. See
box F checked (whichever applies). In
erty in complete liquidation.
Nonbusiness Bad Debts in Pub. 550 for
column (a), enter (for example) “100 sh.
Generally, gain or loss is recognized on
details.
XYZ Co.–2010 short sale closed.” Fill in
property distributed in a complete
Real estate subdivided for sale.
the other columns according to their
liquidation. Treat the property as if it had
Certain lots or parcels that are part of a
instructions. Report the short sale the
been sold at its FMV. See section 336.
tract of real estate subdivided for sale
same way if the corporation received a
Gain on certain short-term federal,
may be treated as capital assets. See
2017 Form 1099-B (or substitute
state, and municipal obligations
section 1237.
statement) that doesn't show the
(other than tax-exempt obligations).
proceeds (sales price).
Sale of a partnership interest. A sale
If a short-term governmental obligation
or other disposition of an interest in a
Loss from securities that are capital
(other than a tax-exempt obligation) that
partnership owning unrealized
assets that become worthless dur-
is a capital asset is acquired at an
receivables or inventory items may
ing the year. Except for securities held
acquisition discount, a portion of any
result in ordinary gain or loss. See Pub.
by a bank, treat the loss as a capital loss
gain realized is treated as ordinary
541, Partnerships.
as of the last day of the tax year. See
income and any remaining balance is
section 582 for the rules on the
treated as a short-term capital gain. See
Special rules for traders in securi-
treatment of securities held by a bank.
section 1271.
ties. Traders in securities are engaged
-2-
Instructions for Schedule D (Form 1120S) (2017)
in the business of buying and selling
The corporation also must
Gain on the constructive sale of cer-
securities for their own account. To be
separately state the amount of
!
tain appreciated financial positions.
engaged in a business as a trader in
the gain rolled over on qualified
Generally, the S corporation must
CAUTION
securities, the corporation:
stock under section 1045 on Form
recognize gain (but not loss) on the date
Must seek to profit from daily market
1120S, Schedule K, line 10. Each
it enters into a constructive sale of any
movements in the prices of securities
shareholder must determine if he or she
appreciated position in stock, a
and not from dividends, interest, or
qualifies for the rollover at the
partnership interest, or certain debt
capital appreciation;
shareholder level. Also, the corporation
instruments as if the position were
Must be involved in a trading activity
must separately state on that line (and
disposed of at FMV on that date.
that is substantial; and
not on Form 8949) any gain that could
The S corporation is treated as
Must carry on the activity with
qualify for the section 1045 rollover at
making a constructive sale of an
continuity and regularity.
the shareholder level instead of the
appreciated position when it (or a
corporate level (because a shareholder
The following facts and
related person, in some cases) does
was entitled to purchase replacement
circumstances should be considered in
one of the following.
stock). If the corporation had a gain on
determining if a corporation's activity is
Enters into a short sale of the same or
qualified stock that could qualify for the
a business.
substantially identical property (that is, a
exclusion under section 1202, report
Typical holding periods for securities
“short sale against the box”).
that gain on Form 8949 (and on Form
bought and sold.
Enters into an offsetting notional
1120S, Schedule K, line 10).
The frequency and dollar amount of
principal contract relating to the same or
the corporation's trades during the year.
substantially identical property.
To be QSB stock, the stock must
The extent to which the shareholders
Enters into a futures or forward
meet all of the following tests.
pursue the activity to produce income
contract to deliver the same or
It must be stock in a C corporation.
for a livelihood.
substantially identical property.
It must have been originally issued
The amount of time devoted to the
Acquires the same or substantially
after August 10, 1993.
activity.
identical property (if the appreciated
As of the date the stock was issued,
Like an investor, a trader generally
position is a short sale, offsetting
the corporation was a qualified small
must report each sale of securities
notional principal contract, or a futures
business. A qualified small business is a
(taking into account commissions and
or forward contract).
domestic C corporation with total gross
any other costs of acquiring or
Exception. Generally, constructive
assets of $50 million or less (a) at all
disposing of the securities) on Form
sale treatment doesn't apply if:
times after August 9, 1993, and before
8949 unless one of the exceptions
The S corporation closed the
the stock was issued, and (b)
described under Exceptions to reporting
transaction before the end of the 30th
immediately after the stock was issued.
each transaction on a separate row in
day after the end of the tax year in which
Gross assets include those of any
the Instructions to Form 8949 applies.
it was entered into,
predecessor of the corporation. All
However, if a trader made the
The S corporation held the
corporations that are members of the
mark-to-market election (see the
appreciated position to which the
same parent-subsidiary controlled
Instructions for Form 4797), each
transaction relates throughout the
group are treated as one corporation.
transaction is reported in Part II of Form
60-day period starting on the date the
The corporation must have acquired
4797 instead of on Form 8949.
transaction was closed, and
the stock at its original issue (either
At no time during that 60-day period
directly or through an underwriter),
The limitation on investment interest
was the S corporation's risk of loss
either in exchange for money or other
expense that applies to investors
reduced by holding certain other
property or as pay for services (other
doesn't apply to interest paid or incurred
positions.
than as an underwriter) to the
in a trading business. A trader reports
corporation. In certain cases, the
interest expense and other expenses
For details and other exceptions to
corporation may meet the test if it
(excluding commissions and other costs
these rules, see Pub. 550.
acquired the stock from another person
of acquiring and disposing of securities)
Rollover of gain from qualified small
who met this test (such as by gift or
from a trading business on page 1 of
business (QSB) stock. If the
inheritance) or through a conversion or
Form 1120S.
corporation sold QSB stock (defined
exchange of QSB stock held by the
A trader also may hold securities for
below) it held for more than 6 months, it
corporation.
investment. The rules for investors
can postpone gain if it purchased other
During substantially all the time the
generally will apply to those securities. If
QSB stock during the 60-day period that
corporation held the stock:
they apply, allocate interest and other
began on the date of the sale. The
1. The issuer was a C corporation;
expenses between the corporation's
corporation must recognize gain to the
trading business and investment
extent the sale proceeds exceed the
2. At least 80% of the value of the
securities. Report investment interest
issuer's assets were used in the active
cost of the replacement stock. Reduce
expense on line 12b of Schedule K and
the basis of the replacement stock by
conduct of one or more qualified
in box 12 of Schedule K-1 using code H.
any postponed gain.
businesses (defined below); and
3. The issuing corporation wasn't a
Gain from certain constructive own-
If the corporation chooses to
ership transactions. Gain in excess of
postpone gain, report the entire gain
foreign corporation, domestic
international sales corporation (DISC),
the net underlying long-term gain the
realized on the sale on Form 8949, Part
corporation would have recognized if it
I or II (with the appropriate box
former DISC, corporation that has made
had held a financial asset directly during
checked). Enter "R" in column (f). Enter
(or that has a subsidiary that has made)
a section 936 election, regulated
the term of a derivative contract must be
the amount of the postponed gain as a
treated as ordinary income. See section
negative number (in parentheses) in
investment company (RIC), real estate
investment trust (REIT), real estate
1260.
column (g). Complete all remaining
columns. See the Instructions for Form
mortgage investment conduit (REMIC),
8949.
Instructions for Schedule D (Form 1120S) (2017)
-3-
financial asset securitization investment
isn't an integral part of a DC Zone
How to report. Report the sale or
trust (FASIT), or cooperative.
business.
exchange on Form 8949, Part II, as the
Note. A specialized small business
Gain from a related-party transaction.
corporation otherwise would without
investment company (SSBIC) is treated
See Sales and Exchanges Between
regard to the exclusion (with the
as having met test (2) above.
Related Persons in chapter 2 of Pub.
appropriate box checked). Enter "X" in
544.
column (f) and enter the amount of the
A qualified business is any business
excluded gain as a negative number (in
other than the following.
See section 1400B for more details
parentheses) in column (g). Complete
One involving services performed in
on DC Zone assets and special rules.
all remaining columns. See the
the fields of health, law, engineering,
How to report. Report the sale or
Instructions for Form 8949.
architecture, accounting, actuarial
exchange on Form 8949, Part II, as the
science, performing arts, consulting,
Collectibles gain (28% rate gain) or
corporation otherwise would without
athletics, financial services, or
loss. Report any 28% rate gain or loss
regard to the exclusion (with the
brokerage services.
on line 8b of Schedule K (and each
appropriate box checked). Enter "X" in
One whose principal asset is the
shareholder's share in box 8b of
column (f). Enter the amount of the
reputation or skill of one or more
Schedule K-1). A collectibles gain or
exclusion as a negative number (in
employees.
loss is any long-term gain or deductible
parentheses) in column (g). Complete
Any banking, insurance, financing,
long-term loss from the sale or
all remaining columns. See the
leasing, investing, or similar business.
exchange of a collectible that is a capital
Instructions for Form 8949 for details.
Any farming business (including the
asset.
raising or harvesting of trees).
Rollover of gain from empowerment
Collectibles include works of art,
Any business involving the production
zone assets. If the corporation sold a
rugs, antiques, metals (such as gold,
of products for which percentage
qualified empowerment zone asset held
silver, and platinum bullion), gems,
depletion can be claimed.
for more than one year, it may be able to
stamps, coins, alcoholic beverages, and
Any business of operating a hotel,
elect to postpone part or all of the gain.
certain other tangible property.
motel, restaurant, or similar business.
See section 1397B for details.
Report any 28% rate gain or loss
For more details about limits and
Exclusion of gain from qualified
from a sale or exchange of a collectible
additional requirements that may apply,
community assets. If the corporation
on Form 8949, Part II (with the
see Pub. 550 or section 1202.
sold or exchanged a qualified
appropriate box checked). See the
community asset acquired after 2001
Exclusion of gain from DC Zone as-
Instructions for Form 8949.
and before 2010, it may be able to
sets. If the corporation sold or
Also include gain (but not loss) from
exclude any qualified capital gain that
exchanged a District of Columbia
the sale or exchange of an interest in a
the corporation would otherwise include
Enterprise Zone (DC Zone) asset
partnership or trust held more than 1
in income. The exclusion applies to an
acquired after 1997 and before 2012,
year and attributable to unrealized
interest in, or property of, certain
and held for more than 5 years, it can
appreciation of collectibles. See
renewal community businesses.
exclude any qualified capital gain that
Regulations section 1.1(h)-1. Also,
the corporation would otherwise include
attach the statement required under
Qualified community asset. A
in income. The exclusion applies to an
Regulations section 1.1(h)-1(e).
qualified community asset is any of the
interest in, or property of, certain
following.
Undistributed long-term gains from
businesses operating in the District of
Qualified community stock.
a regulated investment company
Columbia.
Qualified community partnership
(RIC) or real estate investment trust
interest.
DC Zone asset. A DC Zone asset is
(REIT). Report the corporation's share
Qualified community business
any of the following.
of long-term gains from Form 2439,
property.
DC Zone business stock.
Notice to Shareholder of Undistributed
DC Zone partnership interest.
Long-Term Capital Gains, on Form
Qualified capital gain. Qualified
DC Zone business property.
8949, Part II (with box F checked). Enter
capital gain is any gain recognized on
“From Form 2439” in column (a). Enter
Report the sale or exchange of
the sale or exchange of a qualified
the gain in column (h). Leave all other
tangible property used in the
community asset, but doesn't include
columns blank. See the Instructions for
corporation's DC Zone business on
any of the following.
Form 8949.
Form 4797.
Gain treated as ordinary income
under section 1245.
NAV method for money market
Qualified capital gain. Qualified
Section 1250 gain figured as if
funds. Report capital gain or loss
capital gain is any gain recognized on
section 1250 applied to all depreciation
determined under the net asset value
the sale or exchange of a DC Zone
rather than the additional depreciation.
(NAV) method with respect to shares in
asset, but doesn't include any of the
Gain attributable to real property, or
a money market fund on Form 8949,
following.
an intangible asset, that isn't an integral
Part I, with box C checked. Enter the
Gain attributable to periods after
part of a renewal community business.
name of each fund followed by “(NAV)”
December 31, 2016.
Gain from a related-party transaction.
in column (a). Enter the net gain or loss
Gain attributable to unrecaptured
See Sales and Exchanges Between
in column (h). Leave all other columns
section 1250 gain on the sale of an
Related Persons in chapter 2 of Pub.
blank. See the Instructions for Form
interest in a partnership that is a DC
544.
8949.
Zone business. See the instructions for
Gains attributable to periods after
line 8c of Schedule K for information on
December 31, 2014.
Specific Instructions
how to report unrecaptured section
See section 1400F for more details
1250 gain.
on qualified community assets and
Gain on the sale or exchange of an
Complete all necessary pages of Form
special rules.
interest in a partnership attributable to
8949 before completing line 1b, 2, 3, 8b,
real property or an intangible asset that
9, or 10 of Schedule D.
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Instructions for Schedule D (Form 1120S) (2017)
Rounding Off to Whole
the corporation's only 2017 transaction.
Line 13. Capital Gain
Instead of reporting this transaction on
Dollars
Distributions
Form 8949, the corporation can enter
Enter the total capital gain distributions
Cents can be rounded to whole dollars
$6,000 on Schedule D, line 8a, column
paid to the corporation during the year.
on the Schedule D. If cents are rounded
(d), $2,000 in column (e), and $4,000
to whole dollars, all amounts must be
($6,000 − $2,000) in column (h).
Part III. Built-in Gains Tax
rounded. To round, drop amounts under
If the corporation had a second
50 cents and increase amounts from 50
Section 1374 provides for a tax on
transaction that was the same except
to 99 cents to the next dollar. For
built-in gains. The built-in gains tax may
that the proceeds were $5,000 and the
example, $1.49 becomes $1 and $2.50
apply to the following S corporations.
basis was $3,000, combine the two
becomes $3.
1. An S corporation that was a C
transactions. Enter $11,000 ($6,000 +
corporation before it elected to be an S
If two or more amounts have to be
$5,000) on Schedule D, line 8a, column
corporation.
added to figure the amount to enter on a
(d), $5,000 ($2,000 + $3,000) in column
line, include cents when adding the
(e), and $6,000 ($11,000 − $5,000) in
2. An S corporation that acquired an
amounts and round off only the total.
column (h).
asset with a basis determined (in whole
or in part) by reference to its basis (or
Example 2 — Basis not reported
Parts I and II
the basis of any other property) in the
to IRS. The corporation received a
hands of a C corporation (a
Form 1099-B showing proceeds (in
Lines 1a and 8a—Transactions
transferred-basis acquisition). See
box 1d) of $6,000 and cost or other
Not Reported on Form 8949
section 1374(d)(8).
basis (in box 1e) of $2,000. Box 3 isn't
The corporation can report on line 1a
checked, meaning that basis wasn't
An S corporation may owe the tax if it
(for short-term transactions) or line 8a
reported to the IRS. Don’t report this
has net recognized built-in gain during
(for long-term transactions) the
transaction on line 1a or line 8a.
the applicable recognition period. For
aggregate totals from any transactions
Instead, report the transaction on Form
computation details, see Regulations
(other than sales of collectibles) for
8949. Complete all necessary pages of
section 1.1374-1(a).
which:
Form 8949 before completing line 1b, 2,
For tax years beginning after 2011,
The corporation received a Form
3, 8b, 9, or 10 of Schedule D.
the applicable recognition period is the
1099-B (or substitute statement) that
Example 3 — Adjustment. The
5-year period beginning:
shows basis was reported to the IRS
corporation received a Form 1099-B
For an asset held when the S
and doesn't show any adjustments in
showing proceeds (in box 1d) of $6,000
corporation was a C corporation, on the
box 1f or box 1g;
and cost or other basis (in box 1e) of
first day of the first tax year for which the
The ordinary box in box 2 isn't
$2,000. Box 3 is checked, meaning that
corporation is an S corporation; or
checked; and
basis was reported to the IRS. However,
For a transferred-basis acquisition,
The corporation doesn't need to
the basis shown in box 1e is incorrect.
on the date the asset was acquired by
make any adjustments to the basis or
Don’t report this transaction on line 1a
the S corporation.
type of gain or loss reported on Form
or line 8a. Instead, report the transaction
1099-B (or substitute statement), or to
A corporation described in both (1)
on Form 8949. See the instructions for
its gain or loss.
and (2) above must figure the built-in
Form 8949, columns (f), (g), and (h).
gains tax separately for the group of
Complete all necessary pages of Form
See How To Complete Form 8949,
assets it held at the time its S election
8949 before completing line 1b, 2, 3, 8b,
Columns (f) and (g) in the Instructions
became effective and for each group of
9, or 10 of Schedule D.
for Form 8949 for details about possible
transferred-basis acquisitions. For
adjustments to the corporation's gain or
Lines 1b, 2, 3, 8b, 9, and 10,
details, see Regulations section
loss.
Column (h)—Transactions
1.1374-8.
If the corporation chooses to report
Reported on Form 8949
Certain transactions involving the
these transactions on lines 1a and 8a,
disposal of timber, coal, or domestic
Figure gain or loss on each line. First,
don’t report them on Form 8949. Also,
iron ore under section 631 aren’t subject
subtract cost or other basis in column
the corporation doesn’t need to attach a
to the built-in gains tax. See Rev. Rul.
(e) from proceeds (sales price) in
statement to explain the entries on lines
2001-50, which is on page 343 of
column (d). Then combine the results
1a and 8a.
Internal Revenue Bulletin 2001-43 at
with any adjustments in column (g).
IRS.gov/pub/irs-irbs/irb01-43.pdf.
Figure gain or loss on each line. First,
Enter the results in column (h). Enter
subtract the cost or other basis in
negative amounts in parentheses.
Line 16
column (e) from the proceeds (sales
Example 1 — Gain. Column (d) is
Generally, enter the amount that would
price) in column (d). Enter the gain or
$6,000 and column (e) is $2,000. Enter
be the taxable income of the corporation
loss in column (h). Enter negative
$4,000 in column (h).
for the tax year if only recognized built-in
amounts in parentheses.
gains (including any carryover of gain
Example 2 — Loss. Column (d) is
Example 1 — Basis reported to
under section 1374(d)(2)(B)) and
$6,000 and column (e) is $8,000. Enter
the IRS. The corporation received a
recognized built-in losses were taken
($2,000) in column (h).
Form 1099-B reporting the sale of stock
into account.
Example 3 — Adjustment. Column
held for 3 years, showing proceeds (in
Generally, recognized built-in gain
(d) is $6,000, column (e) is $2,000, and
box 1d) of $6,000 and cost or other
includes the following items.
column (g) is ($1,000). Enter $3,000
basis (in box 1e) of $2,000. Box 3 is
($6,000 − $2,000 − $1,000) in column
checked, meaning that basis was
1. Any gain recognized during the
(h).
reported to the IRS. The corporation
applicable recognition period on the
doesn't need to make any adjustments
sale, distribution, or other disposition of
to the amounts reported on Form
any asset, except to the extent the
1099-B or enter any codes. This was
corporation establishes that:
Instructions for Schedule D (Form 1120S) (2017)
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