Instructions for IRS Form 1040 Schedule D "Capital Gains and Losses"

December 21, 2018 "Instructions For Irs Form 1040 Schedule D - Capital Gains And Losses" contain the updated filing procedures for the IRS-issued Form 1040. Download your copy of the instructions by clicking the link below.

IRS Form 1040 is tax form released and collected by the Internal Revenue Service of the United States.

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Department of the Treasury
Internal Revenue Service
2018 Instructions for Schedule D
Capital Gains
These instructions explain how to complete Schedule D (Form 1040). Complete Form
8949 before you complete line 1b, 2, 3, 8b, 9, or 10 of Schedule D.
and Losses
Use Schedule D:
To figure the overall gain or loss from transactions reported on Form 8949;
To report certain transactions you don't have to report on Form 8949;
To report a gain from Form 2439 or 6252 or Part I of Form 4797;
To report a gain or loss from Form 4684, 6781, or 8824;
To report a gain or loss from a partnership, S corporation, estate, or trust;
To report capital gain distributions not reported directly on Schedule 1 (Form
1040), line 13 (or effectively connected capital gain distributions not reported directly
on Form 1040NR, line 14); and
To report a capital loss carryover from 2017 to 2018.
Additional information. See Pub. 544 and Pub. 550 for more details.
Section references are to the Internal
General
vestment in the QOF if the investment is
Revenue Code unless otherwise noted.
held for at least 10 years. For more in-
Instructions
formation, see How to Report an Elec-
Future Developments
tion to Defer Tax on Eligible Gain In-
Other Forms You May Have
vested in a QO Fund in the Instructions
For the latest information about devel-
for Form 8949 and
Deferral of Gain In-
To File
opments related to Schedule D and its
vested in a
QOF, later.
instructions, such as legislation enacted
Use Form 461 to figure your excess
after they were published, go to
IRS.gov/
Three-year holding period for appli-
business loss.
cable partnership interests. For tax
ScheduleD.
years
beginning
after
2017,
the
Use Form 8949 to report the sale or
long-term capital gains holding period
exchange of a capital asset (defined lat-
What's New
er) not reported on another form or
for an applicable partnership interest in-
creased from more than 1 year to more
schedule and to report the income defer-
Rollover of empowerment zone assets.
than 3 years. The new holding period
ral or exclusion of capital gains. See the
The election to rollover gain from an
applies only to partnership interest held
Instructions for Form 8949. Complete
empowerment zone asset has expired for
in connection with the performance of
all necessary pages of Form 8949 before
2018.
services as defined in section 1061. See
you complete line 1b, 2, 3, 8b, 9, or 10
section 1061 and Pub. 541 for details.
of Schedule D. See
Lines 1a and
8a, lat-
Rollovers into specialized small busi-
er, for more information about when
ness investment companies (SSBICs).
Excess business loss limitation. If you
Form 8949 is needed and when it isn't.
Tax-free rollovers of publicly traded se-
report a loss on line 7 or line 15 of your
curities gains into SSBICs are no longer
Schedule D (Form 1040), you may be
Use Form 4797 to report the follow-
available for sales after December 31,
subject to the new business loss limita-
ing.
2017.
tion. The disallowed loss resulting from
1. The sale or exchange of:
the limitation will not be reflected on
Capital assets. For dispositions after
a. Real property used in your trade
Schedule D. Instead, use new Form 461
2017, certain patents, inventions, mod-
or business;
to figure the amount to include as in-
els, or designs (whether or not patented);
b. Depreciable and amortizable tan-
come on Schedule 1 (Form 1040),
secret formulas or processes; or similar
line 21. Any disallowed loss resulting
gible property used in your trade or
property are not capital assets. See
Capi-
business (but see Disposition of Depre-
from this limitation will be treated as a
tal
Asset, later.
net operating loss (NOL) that must be
ciable Property Not Used in Trade or
Special rules for capital gains invested
carried forward and deducted in a subse-
Business in the Form 4797 instructions);
in
qualified
opportunity
funds
quent tax year. See Form 461 and its in-
c. Oil, gas, geothermal, or other
(QOFs). In 2018, if you have eligible
structions for more information on the
mineral property; and
gains and invested the gains into a QOF,
excess business loss limitation.
you may be able to elect to postpone
d. Section 126 property.
part or all of the gain that you would
2. The involuntary conversion (other
otherwise include in income. You may
than from casualty or theft) of property
also be able to permanently exclude the
used in a trade or business and capital
gain from the sale or exchange of an in-
assets held more than 1 year for business
D-1
Dec 21, 2018
Cat. No. 24331I
Department of the Treasury
Internal Revenue Service
2018 Instructions for Schedule D
Capital Gains
These instructions explain how to complete Schedule D (Form 1040). Complete Form
8949 before you complete line 1b, 2, 3, 8b, 9, or 10 of Schedule D.
and Losses
Use Schedule D:
To figure the overall gain or loss from transactions reported on Form 8949;
To report certain transactions you don't have to report on Form 8949;
To report a gain from Form 2439 or 6252 or Part I of Form 4797;
To report a gain or loss from Form 4684, 6781, or 8824;
To report a gain or loss from a partnership, S corporation, estate, or trust;
To report capital gain distributions not reported directly on Schedule 1 (Form
1040), line 13 (or effectively connected capital gain distributions not reported directly
on Form 1040NR, line 14); and
To report a capital loss carryover from 2017 to 2018.
Additional information. See Pub. 544 and Pub. 550 for more details.
Section references are to the Internal
General
vestment in the QOF if the investment is
Revenue Code unless otherwise noted.
held for at least 10 years. For more in-
Instructions
formation, see How to Report an Elec-
Future Developments
tion to Defer Tax on Eligible Gain In-
Other Forms You May Have
vested in a QO Fund in the Instructions
For the latest information about devel-
for Form 8949 and
Deferral of Gain In-
To File
opments related to Schedule D and its
vested in a
QOF, later.
instructions, such as legislation enacted
Use Form 461 to figure your excess
after they were published, go to
IRS.gov/
Three-year holding period for appli-
business loss.
cable partnership interests. For tax
ScheduleD.
years
beginning
after
2017,
the
Use Form 8949 to report the sale or
long-term capital gains holding period
exchange of a capital asset (defined lat-
What's New
er) not reported on another form or
for an applicable partnership interest in-
creased from more than 1 year to more
schedule and to report the income defer-
Rollover of empowerment zone assets.
than 3 years. The new holding period
ral or exclusion of capital gains. See the
The election to rollover gain from an
applies only to partnership interest held
Instructions for Form 8949. Complete
empowerment zone asset has expired for
in connection with the performance of
all necessary pages of Form 8949 before
2018.
services as defined in section 1061. See
you complete line 1b, 2, 3, 8b, 9, or 10
section 1061 and Pub. 541 for details.
of Schedule D. See
Lines 1a and
8a, lat-
Rollovers into specialized small busi-
er, for more information about when
ness investment companies (SSBICs).
Excess business loss limitation. If you
Form 8949 is needed and when it isn't.
Tax-free rollovers of publicly traded se-
report a loss on line 7 or line 15 of your
curities gains into SSBICs are no longer
Schedule D (Form 1040), you may be
Use Form 4797 to report the follow-
available for sales after December 31,
subject to the new business loss limita-
ing.
2017.
tion. The disallowed loss resulting from
1. The sale or exchange of:
the limitation will not be reflected on
Capital assets. For dispositions after
a. Real property used in your trade
Schedule D. Instead, use new Form 461
2017, certain patents, inventions, mod-
or business;
to figure the amount to include as in-
els, or designs (whether or not patented);
b. Depreciable and amortizable tan-
come on Schedule 1 (Form 1040),
secret formulas or processes; or similar
line 21. Any disallowed loss resulting
gible property used in your trade or
property are not capital assets. See
Capi-
business (but see Disposition of Depre-
from this limitation will be treated as a
tal
Asset, later.
net operating loss (NOL) that must be
ciable Property Not Used in Trade or
Special rules for capital gains invested
carried forward and deducted in a subse-
Business in the Form 4797 instructions);
in
qualified
opportunity
funds
quent tax year. See Form 461 and its in-
c. Oil, gas, geothermal, or other
(QOFs). In 2018, if you have eligible
structions for more information on the
mineral property; and
gains and invested the gains into a QOF,
excess business loss limitation.
you may be able to elect to postpone
d. Section 126 property.
part or all of the gain that you would
2. The involuntary conversion (other
otherwise include in income. You may
than from casualty or theft) of property
also be able to permanently exclude the
used in a trade or business and capital
gain from the sale or exchange of an in-
assets held more than 1 year for business
D-1
Dec 21, 2018
Cat. No. 24331I
or profit. But see Disposition of Depre-
c. From the sale of stock in trade or
of property, such as inherited property.
ciable Property Not Used in Trade or
other property included in inventory or
You need to know your basis to figure
Business in the Form 4797 instructions.
held mainly for sale to customers.
any gain or loss on the sale or other dis-
position of the property. You must keep
3. The disposition of noncapital as-
3. Depreciable property used in your
accurate records that show the basis and,
sets other than inventory or property
trade or business, even if it is fully de-
if applicable, adjusted basis of your
held primarily for sale to customers in
preciated.
property. Your records should show the
the ordinary course of your trade or
4. Real estate used in your trade or
purchase price, including commissions;
business.
business.
increases to basis, such as the cost of
4. Ordinary loss on the sale, ex-
5. For dispositions after December
improvements; and decreases to basis,
change, or worthlessness of small busi-
31, 2017, certain patents, inventions,
such as depreciation, nondividend distri-
ness investment company (section 1242)
models, or designs (whether or not pa-
butions on stock, and stock splits.
stock.
tented); secret formulas or processes; or
If you received a Schedule A to Form
5. Ordinary loss on the sale, ex-
similar property. See section 1221(a)(3).
8971 from an executor of an estate or
change, or worthlessness of small busi-
6. A copyright; a literary, musical,
other person required to file an estate tax
ness (section 1244) stock.
or artistic composition; a letter or mem-
return, you may be required to report a
6. Ordinary gain or loss on securi-
orandum; or similar property that is:
basis consistent with the estate tax value
ties or commodities held in connection
a. Created by your personal efforts;
of the property.
with your trading business, if you previ-
b. Prepared or produced for you (in
ously made a mark-to-market election.
For more information on consistent
the case of a letter, memorandum, or
See
Traders in
Securities, later.
basis reporting and basis generally, see
similar property); or
Column (e)—Cost or Other Basis in the
Use Form 4684 to report involuntary
c. Received under circumstances
Instructions for Form 8949, and the fol-
conversions of property due to casualty
(such as by gift) that entitle you to the
lowing publications.
or theft.
basis of the person who created the
Pub. 551, Basis of Assets.
property or for whom the property was
Use Form 6781 to report gains and
Pub. 550, Investment Income and
prepared or produced.
Expenses (Including Capital Gains and
losses from section 1256 contracts and
Losses).
straddles.
But see the
Tip
about certain musical
Short- or Long-Term Gain or
compositions or copyrights below.
Use Form 8824 to report like-kind
Loss
exchanges. A like-kind exchange occurs
7. A U.S. Government publication,
when you exchange business or invest-
including the Congressional Record, that
Report short-term gains or losses in Part
ment property for property of a like
you received from the government for
I. Report long-term gains or losses in
kind.
less than the normal sales price, or that
Part
II.
The
holding
period
for
you received under circumstances that
Use Form 8960 to figure any net in-
short-term capital gains and losses is
entitle you to the basis of someone who
vestment income tax relating to gains
generally 1 year or less. The holding pe-
received the publication for less than the
and losses reported on Schedule D, in-
riod for long-term capital gains and los-
normal sales price.
cluding gains and losses from a securi-
ses is generally more than 1 year. How-
8. Certain commodities derivative
ties trading activity.
ever, beginning in 2018, the long-term
financial instruments held by a dealer
Capital Asset
holding period for certain gains with re-
and connected to the dealer's activities
spect to “applicable partnership inter-
as a dealer. See section 1221(a)(6).
Most property you own and use for per-
ests” is more than 3 years. See Pub. 541
sonal purposes or investment is a capital
9. Certain hedging transactions en-
for more information.
asset. For example, your house, furni-
tered into in the normal course of your
For more information about holding
ture, car, stocks, and bonds are capital
trade or business. See section 1221(a)
periods, see the Instructions for Form
assets. A capital asset is any property
(7).
8949.
owned by you except the following.
10. Supplies regularly used in your
Capital Gain Distributions
1. Stock in trade or other property
trade or business.
included in inventory or held mainly for
These distributions are paid by a mutual
You can elect to treat as capital
sale to customers. But see the
Tip
about
fund (or other regulated investment
assets certain musical composi-
TIP
certain musical compositions or copy-
company) or real estate investment trust
tions or copyrights you sold or
rights, later.
from its net realized long-term capital
exchanged. See Pub. 550 for details.
2. Accounts or notes receivable:
gains. Distributions of net realized
Basis and Recordkeeping
short-term capital gains aren't treated as
a. For services rendered in the ordi-
capital gains. Instead, they are included
nary course of your trade or business,
Basis is the amount of your investment
on Form 1099-DIV as ordinary divi-
b. For services rendered as an em-
in property for tax purposes. The basis
dends.
ployee, or
of property you buy is usually its cost.
There are special rules for certain kinds
D-2
Enter on Schedule D, line 13, the to-
home during the 2-year period ending on
for 2 of the 5 years before the sale, she
tal capital gain distributions paid to you
the date of the sale or exchange of your
meets the ownership and use require-
during the year, regardless of how long
home.
ments of
Test
1.
you held your investment. This amount
Reduced exclusion. Even if you don't
Qualified extended duty. You are on
is shown in box 2a of Form 1099-DIV.
meet one or both of the above two tests,
qualified extended duty if:
you still can claim an exclusion if you
You are called or ordered to active
If there is an amount in box 2b, in-
sold or exchanged the home because of
duty for an indefinite period or for a pe-
clude that amount on line 11 of the
Un-
a change in place of employment,
riod of more than 90 days; and
recaptured Section 1250 Gain Work-
health, or certain unforeseen circumstan-
sheet
in these instructions if you com-
You are serving at a duty station at
ces. In this case, the maximum amount
plete line 19 of Schedule D.
least 50 miles from your main home, or
of gain you can exclude is reduced. For
you are living in government quarters
If there is an amount in box 2c, see
more information, see Pub. 523.
under government orders.
Exclusion of Gain on Qualified Small
Sale of home by surviving spouse. If
Sale of home acquired in a like-kind
Business (QSB)
Stock, later.
your spouse died before the sale or ex-
exchange. You can't exclude any gain
change, you can still exclude up to
If there is an amount in box 2d, in-
if:
$500,000 of gain if:
clude that amount on line 4 of the
28%
You acquired your home in a
The sale or exchange is no later
Rate Gain Worksheet
in these instruc-
like-kind exchange in which all or part
than 2 years after your spouse's death;
tions if you complete line 18 of Sched-
of the gain wasn't recognized, and
Just before your spouse's death,
ule D.
You sold or exchanged the home
both spouses met the use requirement of
during the 5-year period beginning on
If you received capital gain distribu-
Test
1, at least one spouse met the own-
the date you acquired it.
tions as a nominee (that is, they were
ership requirement of
Test
1, and both
paid to you but actually belong to some-
How to report the sale of your main
spouses met
Test
2; and
one else), report on Schedule D, line 13,
home. If you have to report the sale or
You didn't remarry before the sale
only the amount that belongs to you. At-
exchange, report it on Form 8949. If the
or exchange.
tach a statement showing the full
gain or loss is short term, report it in
Exceptions to Test 1. You can choose
amount you received and the amount
Part I of Form 8949 with box C
to have the 5-year test period for owner-
you received as a nominee. See the In-
checked. If the gain or loss is long term,
ship and use in
Test 1
suspended during
structions for Schedule B to learn about
report it in Part II of Form 8949 with
any period you or your spouse serve out-
the requirement for you to file Forms
box F checked.
side the United States as a Peace Corps
1099-DIV and 1096.
If you had a gain and can exclude
volunteer or serve on qualified official
Sale of Your Home
part or all of it, enter “H” in column (f)
extended duty as a member of the uni-
of Form 8949. Enter the exclusion as a
formed services or Foreign Service of
You may not need to report the sale or
negative number (in parentheses) in col-
the United States, as an employee of the
exchange of your main home. If you
umn (g) of Form 8949. See the instruc-
intelligence community, or outside the
must report it, complete Form 8949 be-
tions for Form 8949, columns (f), (g),
United States as an employee of the
fore Schedule D.
and (h). Complete all columns.
Peace Corps. This means you may be
Report the sale or exchange of your
able to meet
Test 1
even if, because of
If you had a loss but have to report
main home on Form 8949 if:
your service, you didn't actually use the
the sale or exchange because you got a
You can't exclude all of your gain
home as your main home for at least the
Form 1099-S, see
Nondeductible
Losses,
from income, or
required 2 years during the 5-year period
later, for instructions about how to re-
You received a Form 1099-S for
ending on the date of sale. The 5-year
port it.
the sale or exchange.
period can't be extended for more than
More information. See Pub. 523 for
Any gain you can't exclude is taxable.
10 years.
additional details, including how to fig-
Generally, if you meet the following two
ure and report any taxable gain if:
Example. Tamara buys a house in
tests, you can exclude up to $250,000 of
You (or your spouse if married)
Virginia in 2006 that she uses as her
gain. If both you and your spouse meet
used any part of the home for business
main home for 3 years. For 8 years,
these tests and you file a joint return,
or rental purposes after May 6, 1997, or
from 2009 through 2017, Tamara serves
you can exclude up to $500,000 of gain
There was a period of time after
on qualified official extended duty as a
(but only one spouse needs to meet the
2008 when the home wasn't your main
member of the uniformed services in
ownership requirement in
Test
1).
home.
Kuwait. In 2018, Tamara sells the
Test 1. During the 5-year period ending
house. Tamara didn't use the house as
Partnership Interests
on the date you sold or exchanged your
her main home for 2 of the 5 years be-
home, you owned it for 2 years or more
A sale or other disposition of an interest
fore the sale. To meet
Test
1, Tamara
(the ownership requirement) and lived in
in a partnership may result in ordinary
elects to suspend the 5-year test period
it as your main home for 2 years or more
income, collectibles gain (28% rate
during her 8-year period of uniformed
(the use requirement).
gain), or unrecaptured section 1250
service in Kuwait. Because that 8-year
gain. For details on 28% rate gain, see
period won't be counted in determining
Test 2. You haven't excluded gain on
the instructions for line 18. For details
if she used the house as her main home
the sale or exchange of another main
D-3
on unrecaptured section 1250 gain, see
column (g). Then enter -0- ($5,000 −
cause the loss isn't deductible, enter “L”
the instructions for line 19.
$6,000 + $1,000) in column (h). Be sure
in column (f). Enter the amount of the
to check box C at the top of Part I or box
nondeductible loss as a positive number
Capital Assets Held for
F at the top of Part II of this Form 8949
in column (g). Complete column (h).
Personal Use
(depending on how long you owned the
See the instructions for Form 8949, col-
home).)
umns (f), (g), and (h).
Generally, gain from the sale or ex-
Capital Losses
change of a capital asset held for person-
Example 1. You sold land you held
al use is a capital gain. Report it on
as an investment for 5 years to your
You can deduct capital losses up to the
Form 8949 with box C checked (if the
brother for $10,000. Your basis was
amount of your capital gains plus $3,000
transaction is short term) or box F
$15,000. On Part II of Form 8949, check
($1,500 if married filing separately).
checked (if the transaction is long term).
box F at the top. Enter $10,000 on Form
You may be able to use capital losses
However, if you converted depreciable
8949, Part II, column (d). Enter $15,000
that exceed this limit in future years. For
property to personal use, all or part of
in column (e). Because the loss isn't de-
details, see the instructions for line 21.
the gain on the sale or exchange of that
ductible, enter “L” in column (f) and
Be sure to report all of your capital gains
property may have to be recaptured as
$5,000 (the difference between $10,000
and losses even if you can't use all of
ordinary income. Use Part III of Form
and $15,000) in column (g). In column
your losses in 2018.
4797 to figure the amount of ordinary
(h), enter -0- ($10,000 − $15,000 +
Nondeductible Losses
income recapture. The recapture amount
$5,000). If this is your only transaction
is included on line 31 (and line 13) of
on this Form 8949, enter $10,000 on
Don't deduct a loss from a sale or ex-
Form 4797. Don't enter any gain from
Schedule D, line 10, column (d). Enter
change between certain related parties.
this property on line 32 of Form 4797. If
$15,000 in column (e) and $5,000 in
This includes a direct or indirect sale or
you aren't completing Part III for any
column (g). In column (h), enter -0-
exchange of property between any of the
other properties, enter “N/A” on line 32.
($10,000 − $15,000 + $5,000).
following.
If the total gain is more than the recap-
Example 2. You received a Form
Members of a family.
ture amount, enter “From Form 4797” in
1099-B showing proceeds (sales price)
A corporation and an individual
column (a) of Part I of Form 8949 (if the
of $1,000 and basis of $5,000. Box 7 on
who directly (or indirectly) owns more
transaction is short term) or Part II of
Form 1099-B is checked, indicating that
than 50% of the corporation's stock (un-
Form 8949 (if the transaction is long
your loss of $4,000 ($1,000 − $5,000)
less the loss is from a distribution in
term), and skip columns (b) and (c). In
isn't allowed. On the top of Form 8949,
complete liquidation of a corporation).
column (d) of Form 8949, enter the ex-
check box A or box B in Part I or box D
A grantor and a fiduciary of a
cess of the total gain over the recapture
or box E in Part II (whichever applies).
trust.
amount. Leave columns (e) through (g)
Enter $1,000 in column (d) and $5,000
A fiduciary and a beneficiary of
blank. Complete column (h). Be sure to
in column (e). Because the loss isn't de-
the same trust.
check box C at the top of Part I or box F
ductible, enter “L” in column (f) and
A fiduciary of a trust and a fiducia-
at the top of Part II of this Form 8949
$4,000 (the difference between $1,000
ry (or beneficiary) of another trust if
(depending on how long you held the as-
and $5,000) in column (g). In column
both trusts were created by the same
set).
(h), enter -0- ($1,000 − $5,000 +
grantor.
$4,000).
Loss from the sale or exchange of a
An executor of an estate and a ben-
capital asset held for personal use isn't
eficiary of that estate, unless the sale or
At-risk rules. If you disposed of (a) an
deductible. But if you had a loss from
exchange was to satisfy a pecuniary be-
asset used in an activity to which the
the sale or exchange of real estate held
quest (that is, a bequest of a sum of
at-risk rules apply, or (b) any part of
for personal use for which you received
money).
your interest in an activity to which the
a Form 1099-S, you must report the
An individual and a tax-exempt or-
at-risk rules apply, and you have
transaction on Form 8949 even though
ganization controlled directly (or indi-
amounts in the activity for which you
the loss isn't deductible.
rectly) by the individual or the individu-
aren't at risk, see the Instructions for
al's family.
Form 6198.
Example. You have a loss on the
sale of a vacation home that isn't your
Passive activity rules. If the loss is al-
See Pub. 544 for more details on
main home and you received a Form
lowable under the at-risk rules, it may be
sales and exchanges between related
1099-S for the transaction. Report the
subject to the passive activity rules. See
parties.
transaction in Part I or Part II of Form
Form 8582 and its instructions for de-
8949, depending on how long you
Report a transaction that results in a
tails on reporting capital gains and los-
owned the home. Complete all columns.
nondeductible loss in Part I or Part II of
ses from a passive activity.
Because the loss isn't deductible, enter
Form 8949 (depending on how long you
Items for Special Treatment
“L” in column (f). Enter the difference
held the property). Unless you received
Transactions by a securities dealer.
between column (d) and column (e) as a
a Form 1099-B for the sale or exchange,
See section 475 and Rev. Rul. 97-39,
positive amount in column (g). Then
check box C at the top of Part I or box F
which begins on page 4 of Internal Rev-
complete column (h). (For example, if
at the top of Part II of this Form 8949
enue Bulletin 1997-39 at
IRS.gov/pub/
you entered $5,000 in column (d) and
(depending on how long you owned the
irs-irbs/irb97-39.pdf.
$6,000 in column (e), enter $1,000 in
property). Complete all columns. Be-
D-4
Bonds and other debt instruments.
a dividend that equals or exceeds 10%
Tax on Eligible Gain Invested in a QO
See Pub. 550.
(5% in the case of preferred stock) of
Fund in the Form 8949 instructions.
Certain real estate subdivided for
your basis in the stock.
Market Discount Bonds
sale that may be considered a capital as-
Amounts received by shareholders
In general, a capital gain from the dispo-
set. See section 1237.
in corporate liquidations. See Pub. 550.
sition of a market discount bond is trea-
Gain on the sale of depreciable
Cash received in lieu of fractional
ted as interest income to the extent of
property to a more-than-50%-owned en-
shares of stock as a result of a stock split
accrued market discount as of the date
tity or to a trust of which you are a bene-
or stock dividend. See Pub. 550.
of
disposition.
See
sections
1276
ficiary. See Pub. 544.
Load charges to acquire stock in a
through 1278 and Pub. 550 for more in-
Gain on the disposition of stock in
regulated investment company (includ-
formation on market discount. See the
domestic international sales corpora-
ing a mutual fund), which may not be
Instructions for Form 8949 for detailed
tions. See section 995(c).
taken into account in determining gain
information about how to report the dis-
Gain on the sale or exchange of
or loss on certain dispositions of the
position of a market discount bond.
stock in certain foreign corporations.
stock if reinvestment rights were exer-
See section 1248.
cised. See Pub. 550.
Contingent Payment Debt
Transfer of property to a partner-
The sale or exchange of S corpora-
Instruments
ship that would be treated as an invest-
tion stock or an interest in a partnership
ment company if it were incorporated.
or trust held for more than 1 year, which
Any gain recognized on the sale, ex-
See Pub. 541.
may result in collectibles gain (28% rate
change, or retirement of a taxable con-
Sales of stock received under a
gain). See the instructions for line 18.
tingent payment debt instrument subject
qualified public utility dividend rein-
Gain or loss on the disposition of
to the noncontingent bond method is
vestment plan. See Pub. 550.
securities futures contracts. See Pub.
treated as interest income rather than as
Transfer of appreciated property to
550.
capital gain, even if you hold the debt
a political organization. See section 84.
Gain on the constructive sale of
instrument as a capital asset. If you sell
Transfer of property by a U.S. per-
certain appreciated financial positions.
a taxable contingent payment debt in-
son to a foreign estate or trust. See sec-
See Pub. 550.
strument subject to the noncontingent
tion 684.
Certain
constructive
ownership
bond method at a loss, your loss is an or-
If you give up your U.S. citizen-
transactions. Gain in excess of the gain
dinary loss to the extent of your prior
ship, you may be treated as having sold
you would have recognized if you had
original issue discount (OID) inclusions
all your property for its fair market val-
held a financial asset directly during the
on the debt instrument. If the debt in-
ue on the day before you gave up your
term of a derivative contract must be
strument is a capital asset, treat any loss
citizenship.
This
also
applies
to
treated as ordinary income. See section
that is more than your prior OID inclu-
long-term U.S. residents who cease to be
1260. If any portion of the constructive
sions as a capital loss. See Regulations
lawful permanent residents. For details,
ownership transaction was open in any
section 1.1275-4(b) for exceptions to
exceptions, and rules for reporting these
prior year, you may have to pay interest.
these rules.
deemed sales, see Pub. 519 and Form
See section 1260(b) for details, includ-
If you received a Form 1099-B (or
8854.
ing how to figure the interest. Include
substitute statement) reporting the sale
In general, no gain or loss is recog-
the interest as an additional tax on
of a taxable contingent payment debt in-
nized on the transfer of property from an
Schedule 4 (Form 1040), line 62. Check
strument subject to the noncontingent
individual to a spouse or a former
box c and in the space next to that box,
bond method and the Ordinary box in
spouse if the transfer is incident to a di-
enter “Section 1260(b) interest” and the
box 2 is checked, an adjustment may be
vorce. See Pub. 504.
amount of the interest. If you are filing
required. Report the transaction on Form
Amounts received on the retire-
Form 1040NR, include the interest as an
8949 and complete the form’s Work-
ment of a debt instrument generally are
additional tax on line 60. Check box b
sheet for Contingent Payment Debt In-
treated as received in exchange for the
and, in the space next to that box, enter
strument Adjustment in Column (g) to
debt instrument. See Pub. 550.
“Section 1260(b) interest” and the
figure the adjustment to enter in column
Any loss on the disposition of con-
amount of the interest. This interest isn't
(g) of Form 8949.
verted wetland or highly erodible crop-
deductible.
land that is first used for farming after
Gain or loss from the disposition
See Pub. 550 or Pub. 1212 for more
March 1, 1986, is reported as a
of stock or other securities in an invest-
details on any special rules or adjust-
long-term capital loss on Form 8949, but
ment club. See Pub. 550.
ments that might apply.
any gain is reported as ordinary income
Certain virtual currencies, such as
Wash Sales
on Form 4797.
Bitcoin. See Notice 2014-21, 2014-16
If qualified dividends that you re-
I.R.B. 938, available at
IRS.gov/irb/
A wash sale occurs when you sell or
ported on Form 1040, line 3a, or Form
2014-16_IRB/ar12.html.
otherwise dispose of stock or securities
1040NR, line 10b, include extraordinary
If you are deferring eligible gain
(including a contract or option to acquire
dividends, any loss on the sale or ex-
by investing in a QOF, report the gain
or sell stock or securities) at a loss and,
change of the stock is a long-term capi-
on the form you normally report the gain
within 30 days before or after the sale or
tal loss to the extent of the extraordinary
and report the deferral on Form 8949.
disposition, you:
dividends. An extraordinary dividend is
See How to Report an Election to Defer
D-5
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