Instructions For Schedule D-1 - Sales Of Business Property

2016 Instructions for Schedule D-1

Sales of Business Property

(Also Involuntary Conversions and Recapture Amounts Under IRC Sections 179 and 280F(b)(2))

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

General Information

Complete and attach this form to your tax return

if any, from federal Form 8824 (using California

only if your California gains or losses from the

amounts) on line 5 or line 16, whichever applies.

In general, for taxable years beginning on or

sale or exchange of assets used in a trade or

If an exchange was made with a related party,

after January 1, 2015, California law conforms

business are different from your federal gains or

write “Related Party Like-Kind Exchange” in the

to the Internal Revenue Code (IRC) as of

losses. (For common examples of items to report

top margin of Schedule D-1.

January 1, 2015. However, there are continuing

on this schedule, see the instructions for federal

Installment Sales. If you sold property at a gain

differences between California and federal law.

Form 4797, Sales of Business Property.)

and you will receive a payment in a tax year after

When California conforms to federal tax law

Use this form to report:

the year of sale, you must report the sale on the

changes, we do not always adopt all of the

installment method unless you elect not to do so.

changes made at the federal level. For more

1. The sale or exchange of:

information, go to ftb.ca.gov and search for

For nonresidents, or part-year residents, who

• Trade or business property

conformity. Additional information can be found

change their residency, get FTB Pub. 1100,

• Depreciable and amortizable property

in FTB Pub. 1001, Supplemental Guidelines

Taxation of Nonresidents and Individuals Who

• Oil, gas, and geothermal property

to California Adjustments, the instructions for

Change Residency, to help determine their taxable

• IRC Section 126 property

California Schedule CA (540 or 540NR), and the

income from an installment sale.

2. The involuntary conversion (other than

Business Entity tax booklets.

Use form FTB 3805E, Installment Sale Income,

casualty or theft) of trade or business property

The instructions provided with California tax

to report the sale on the installment method.

and capital assets held in connection with a

forms are a summary of California tax law and are

Also use form FTB 3805E to report any payment

trade or business or a transaction entered into

only intended to aid taxpayers in preparing their

received in 2016 from a previous installment sale.

for profit.

state income tax returns. We include information

If you elect not to use the installment method for

3. The disposition of noncapital assets (other

that is most useful to the greatest number of

California, report the full amount of the gain on a

than inventory or property held primarily for

taxpayers in the limited space available. It is

timely filed tax return (including extensions).

sale to customers in the ordinary course of

not possible to include all requirements of the

your trade or business).

Property Subject to IRC Section 179 Expense

California Revenue and Taxation Code (R&TC) in

Deduction Recapture. Partnerships, LLCs

the instructions. Taxpayers should not consider

4. The disposition of capital assets not reported

classified as partnerships, and S corporations

the instructions as authoritative law.

on Schedule D (100 or 100W), California

that sell or otherwise dispose of property for

Capital Gains and Losses; Schedule D (100S),

Partnerships, Limited Liability

which an IRC Section 179 expense deduction

S Corporation Capital Gains and Losses and

Companies (LLCs) classified as partnerships,

was previously claimed and passed through

Built-In Gains; Schedule D (540 or 540NR),

S corporations, and their partners, members,

to the partners, members, or S corporation

California Capital Gain or Loss Adjustment.

and shareholders, must follow the new

shareholders must follow these instructions to

procedures for reporting all sales or other

5. The recapture of IRC Section 179 deductions

report the transaction.

dispositions of property for which the IRC

for partners, members, and S corporation

Partners, members, and S corporation

Section 179 expense deduction was claimed.

shareholders from property distributions by

shareholders who receive a Schedule K-1 (565,

See Property Subject to IRC Section 179

partnerships, LLCs classified as partnerships,

568, or 100S), Share of Income, Deductions,

Expense Deduction Recapture, under General

and S corporations, respectively. See Property

Credits, etc., showing such disposition must also

Information B, Special Rules, for details.

Subject to IRC Section 179 Expense Deduction

follow these instructions to report the transaction.

Recapture, under General Information B,

Repeal of Geographically Targeted Economic

Special Rules, for the reporting requirements.

Partnerships, LLCs, and S Corporations.

Development Area Tax Incentives – The

California legislature repealed and made changes

6. The computation of recapture amounts

Gains or losses from the sale or disposition of

to all of the Geographically Targeted Economic

under IRC Sections 179 and 280F(b)(2)

assets previously subject to the IRC Section 179

Development Area (G-TEDA) Tax Incentives.

when the business use of IRC Section 179

expense deduction are to be reported on

Enterprise Zones (EZ) and Local Agency Military

or 280F(b)(2) property drops to 50% or less.

Form 565, Partnership Return of Income;

Base Recovery Areas (LAMBRA) were repealed

Form 568, Limited Liability Company Return of

B Special Rules

on January 1, 2014. The Targeted Tax Areas (TTA)

Income; or Form 100S, California S Corporation

and Manufacturing Enhancement Areas (MEA)

Franchise or Income Tax Return, and on the

Combined Reporting Groups. Each corporation

both expired on December 31, 2012. For more

corresponding Schedules K (565, 568, or 100S)

that is a member of a combined reporting

information, go to ftb.ca.gov and search for

and K-1 (565, 568, or 100S).

group should complete this form to report its

repeal tax incentives.

share of business gains and losses apportioned

• Partnerships. Follow the instructions for

to California and its nonbusiness gains and

Like-Kind Exchanges – For taxable years

federal Form 4797 under “Disposition by a

losses that are allocated to California. For

beginning on or after January 1, 2014, California

Partnership or S Corporation of Section 179

more information, see Cal. Code Regs., tit. 18

requires taxpayers who exchange property

Property” to report the transaction on

section 25106.5-2 and FTB Pub. 1061, Guidelines

located in California for like-kind property

the partnership tax return (including the

for Corporations Filing a Combined Report.

located outside of California, and meet all of the

Schedules K (565) and K-1 (565) reporting

requirements of the IRC Section 1031, to file

requirements).

Casualties and Thefts. Complete and attach

an annual information return with the Franchise

federal Form 4684, Casualties and Thefts, using

• LLCs. The gain on the property subject to the

Tax Board (FTB). For more information, get form

California amounts.

IRC Section 179 expense deduction recapture

FTB 3840, California Like-Kind Exchanges, or go

must be included in the total income for the

Exchange of “Like-Kind” Property. Complete and

to ftb.ca.gov and search for like kind.

LLC. Report the gain on property subject

attach federal Form 8824, Like-Kind Exchanges,

to the IRC Section 179 expense deduction

A Purpose

using California amounts.

recapture on Schedule K (565 or 568),

Report the exchange of like-kind property,

Use Schedule D-1, Sales of Business Property, to

line 10a.

even if no gain or loss is recognized. Write

report the sale or exchange of business property

“Like-Kind Exchange from Form 8824” as the

when the California basis of the asset(s) is

property description, and enter the gain or loss,

different from the federal basis due to differences

between California and federal law.

Schedule D-1 Instructions 2016 Page 1

Instructions For Schedule D-1 - Sales Of Business Property - 2016

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