Table of Contents
Gain or loss recognized by any applicable financial institution from the sale or exchange of applicable preferred stock is ordinary income or loss. An applicable financial institution includes a financial institution referred to in section 582(c)(2), or a depository institution holding company defined in section 3(w)(1) of the Federal Deposit Insurance Act. Applicable preferred stock is preferred stock of the Federal National Mortgage Association (Fannie Mae), or the Federal Home Loan Mortgage Corporation (Freddie Mac), that was (1) held by the applicable financial institution on September 6, 2008, or (2) sold or exchanged by the applicable financial institution after December 31, 2007, and before September 7, 2008.
Use Schedule D to report:
-
Sales or exchanges of capital assets.
-
Gains on distributions to shareholders of appreciated capital assets.
-
Nonbusiness bad debts.
-
Net recognized built-in gain as defined in section 1374(d)(2). The built-in gains tax is figured in Part III of Schedule D.
Generally, report every sale or exchange of a capital asset (including like-kind exchanges) on this schedule even if there is no gain or loss.
Use Form 4797, Sales of Business Property, to report the following.
-
The sale, exchange, or distribution of property used in a trade or business.
-
The sale, exchange, or distribution of depreciable and amortizable property.
-
The sale or other disposition of securities or commodities held in connection with a trading business, if the corporation made a mark-to-market election.
-
The involuntary conversion (other than from casualty or theft) of property and capital assets held for business or profit.
-
The disposition of noncapital assets other than inventory or property held primarily for sale to customers in the ordinary course of the corporation's trade or business.
Use Form 4684, Casualties and Thefts, to report involuntary conversions of property due to casualty or theft.
Use Form 6781, Gains and Losses From Section 1256 Contracts and Straddles, to report gains and losses from section 1256 contracts and straddles.
Use Form 8824, Like-Kind Exchanges, if the corporation made one or more “like-kind” exchanges. A like-kind exchange occurs when the corporation exchanges business or investment property for property of a like kind. For exchanges of capital assets, include the gain or (loss) from Form 8824, if any, on line 3 or line 9.
Each item of property the corporation held (whether or not connected with its trade or business) is a capital asset except the following. See section 1221(a) for details.
-
Stock in trade or other property included in inventory or held mainly for sale to customers. But see the Tip on this page.
-
Accounts or notes receivable acquired in the ordinary course of the trade or business for services rendered or from the sale of stock in trade or other property included in inventory or held mainly for sale to customers.
-
Depreciable or real property used in the trade or business, even if it is fully depreciated.
-
Certain copyrights; literary, musical, or artistic compositions; letters or memoranda; or similar property. But see the Tip on this page.
-
U.S. Government publications, including the Congressional Record, that the corporation received from the Government, other than by purchase at the normal sales price, or that the corporation got from another taxpayer who had received it in a similar way, if the corporation's basis is determined by reference to the previous owner's basis.
-
Certain commodities derivative financial instruments held by a dealer.
-
Certain hedging transactions entered into in the normal course of the trade or business.
-
Supplies regularly used in the trade or business.
You can elect to treat as capital assets certain musical compositions or copyrights you sold or exchanged. See Pub. 550 for details.
Note.
For more information, see Pub. 544, Sales and Other Dispositions of Assets.
-
Must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation.
-
Must be involved in a trading activity that is substantial.
-
Must carry on the activity with continuity and regularity.
-
Typical holding periods for securities bought and sold.
-
The frequency and dollar amount of the corporation's trades during the year.
-
The extent to which the shareholders pursue the activity to produce income for a livelihood.
-
The amount of time devoted to the activity.
Note.
A specialized small business investment company (SSBIC) is treated as having met test (2) above.
-
It must be stock in a C corporation.
-
It must have been originally issued after August 10, 1993.
-
As of the date the stock was issued, the corporation was a qualified small business. A qualified small business is 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.
-
The corporation 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, the corporation may meet the test if it acquired the stock from another person who met this test (such as by gift or inheritance) or through a conversion or exchange of qualified small business stock held by the corporation.
-
During substantially all the time the corporation held the stock:
-
The issuer was a C corporation,
-
At least 80% of the value of the issuer's assets were used in the active conduct of one or more qualified businesses (defined below), and
-
The issuing corporation was not a foreign corporation, DISC, former DISC, corporation that has made (or that has a subsidiary that has made) a section 936 election, regulated investment company, real estate investment trust, REMIC, FASIT, or cooperative.
-
-
One involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services.
-
One whose principal asset is the reputation or skill of one or more employees.
-
Any banking, insurance, financing, leasing, investing, or similar business.
-
Any farming business (including the raising or harvesting of trees).
-
Any business involving the production of products for which percentage depletion can be claimed.
-
Any business of operating a hotel, motel, restaurant, or similar business.
-
Stock in a domestic corporation that was a DC Zone business.
-
Interest in a partnership that was a DC Zone business.
The following gains do not qualify for the exclusion of gain from DC Zone assets.
-
Gain on the sale of an interest in a partnership, which is a DC Zone business, attributable to unrecaptured section 1250 gain. See the instructions for line 8c of Schedule K for information on how to report unrecaptured section 1250 gain.
-
Gain on the sale of an interest in a partnership attributable to real property or an intangible asset that is not an integral part of a DC Zone business.
-
Gain from a related-party transaction. See Sales and Exchanges Between Related Persons in chapter 2 of Pub. 544.
See Pub. 954, Tax Incentives for Distressed Communities, and section 1400B for more details on DC Zone assets and special rules.
A qualified community asset is any of the following.
-
Qualified community stock.
-
Qualified community partnership interest.
-
Qualified community business property.
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.
-
Gain treated as ordinary income under section 1245.
-
Section 1250 gain figured as if section 1250 applied to all depreciation rather than the additional depreciation.
-
Gain attributable to real property, or an intangible asset, that is not an integral part of a renewal community business.
-
Gain from a related-party transaction. See Sales and Exchanges Between Related Persons in chapter 2 of Pub. 544.
See Pub. 954 and section 1400F for more details and special rules.
Report the entire gain realized from the sale or exchange as the corporation otherwise would without regard to the exclusion. On Schedule D, line 7, enter “Qualified Community Asset” in column (a) and enter as a loss in column (f) the amount of the allowable exclusion. If reporting the sale directly on Schedule D, line 7, use the line directly below the line on which the corporation is reporting the sale.
More Online Instructions |