2006 Instructions For Schedule D (568) printable pdf download

Instructions for Schedule D (568)

Capital Gain or Loss

General Information

instructions for Schedule K (568) and Schedule K-1 (568) for more

information. Also, refer to the instructions for federal Schedule D (1065).

In general, California law conforms to the Internal Revenue Code (IRC)

Nonresident and Part-Year Resident Partners, get FTB Pub. 1100,

as of January 2005. However, there are continuing differences between

Taxation of Nonresidents and Individuals Who Change Residency

California and federal law. When California conforms to federal tax law

changes, we do not always adopt all of the changes made at the federal

Note: With the enactment of AB 1115 (Stats. 2001, Ch 920) capital

level. For more information regarding California and federal law, go to

loss carryover and capital loss limitations for nonresident members

our Website at and search for conformity. Additional

and part-year resident members, for the portion of the year they were

information can be found in FTB Pub. 1001, Supplemental Guidelines to

nonresidents, are determined based upon California source income

California Adjustments, the instructions for California Schedule CA (540

and loss items only for the computation of their California taxable

or 540NR), and the Business Entity tax booklets.

income. Moreover, the character of their gains and losses on the sale or

exchange of property used in trade or business or certain involuntary

Note, the instructions provided with California tax forms are a summary

conversions (IRC Section 1231) are determined for purposes of

of California tax law and are only intended to aid taxpayers in preparing

calculating their California taxable income by netting California sources

their state income tax returns. We include information that is most

Section 1231 gains and losses only.

useful to the greatest number of taxpayers in the limited space available.

It is not possible to include all requirements of the California Revenue

California law conforms to federal law for the recognition of gain on

and Taxation Code (R&TC) in the tax booklets. Taxpayers should not

a constructive sale of property in which the LLC held an appreciated

consider the tax booklets as authoritative law.

interest.

Internet Access

Qualified Small Business Stock

You can download, view, and print California tax forms and publications

R&TC Section 18152.2 is similiar to IRC Section 1202 regarding the

from our Website at .

exclusion of 50% of the gain on the sale of qualifying small business

stock originally issued after August 10, 1993, that was held for more

Access other state agencies’ websites through the State Agency Index

than five years. However, for California purposes, at least 80% of the

on California’s Website at

issuing corporation’s payroll must be attributable to employment located

within California, and at least 80% of the value of the corporation’s

Purpose

assets must be used by the corporation to actively conduct one or more

Use Schedule D (568), Capital Gain or Loss, to report the sale or

qualified trades or businesses in California.

exchange of capital assets, except capital gains (losses) that are

R&TC Section 18038.5 also provides for the deferral of gain from the

specially allocated to any members. Do not use this form to report

sale of small business stock that has been held for six months or more,

the sale of business property. For sales of business properties, use

if qualified replacement stock is purchased within 60 days after the sale

California Schedule D-1, Sale of Business Property.

giving rise to the gain. Report gain deferred from the sale of qualified

Enter specially allocated capital gains (losses) received from limited

small business stock in accordance with the instructions contained in

liability companies (LLCs) classified as partnerships, partnerships,

Revenue Procedure 98-48.

S corporations, and fiduciaries on Schedule D (568), line 3. Enter capital

Note: The LLC also must separately state the amount of the gain

gains (losses) that are specially allocated to members on

that qualifies for the 50% exclusion under R&TC Section 18152.5 on

Schedule K-1 (568), Member’s Share of Income, Deductions, Credits,

Schedule K, line 7. Each member must determine if he or she qualifies

etc., line 4d. Do not include these amounts on Schedule D (568). See the

for the gain at the member level.

Instructions for Form FTB 3885L

Depreciation and Amortization

A Purpose

• Before January 1, 1987: California disallowed depreciation under

the federal Accelerated Cost Recovery System (ACRS). Continue to

Use form FTB 3885L, Depreciation and Amortization, to compute

calculate California depreciation in the same manner as in prior years

depreciation and amortization allowed as a deduction on Form 568,

for those assets.

Limited Liability Company Return of Income. Attach form FTB 3885L to

• On or after January 1, 1987: California provides special credits and

Form 568.

accelerated write-offs that affect the California basis for qualifying

Depreciation is the annual deduction allowed to recover the cost or other

assets. California does not conform to all the changes to federal law

basis of business or income producing property with a determinable

enacted in 1993. Therefore, the California basis or recovery periods

useful life of more than one year. Land is not depreciable.

may be different for some assets.

Amortization is an amount deducted to recover the cost of certain capital

Additional differences may occur for the following:

expenses over a fixed period.

• Luxury Automobile Depreciation: California generally conforms

In general, California conforms to federal law for assets placed in service

to the federal 2003 increase (IRC Section 280F) for the limitation

on or after January 1, 1987. See California Revenue and Taxation Code

on luxury automobile depreciation. However, California does not

(R&TC) Section 17250.

conform to IRC Section 168(k) provisions (30% and 50% additional

first year depreciation). In addition, SUVs and minivans built on a

B Federal/State Calculation Differences

truck chassis are included in the definition of trucks and vans when

applying the 6,000 pound gross weight limit.

California law has not always conformed to federal law with regard

to depreciation methods, special credits, or accelerated write-offs.

• Amortization of Certain Intangibles (IRC Section 197): Property

Consequently, the recovery periods and the basis on which the

classified as Section 197 property under federal law is also

depreciation is calculated may be different from the amounts used for

Section 197 property for California purposes. There is no separate

federal purposes. Reportable differences may occur if all or part of your

California election required or allowed. However, for Section 197

assets were placed in service:

property acquired before January 1, 1994, the California adjusted

Schedule D (568)/FTB 3885L Instructions 2006 Page 35

2006 Instructions For Schedule D (568)

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