Instructions For Schedule D-1 - Sales Of Business Property

The LLC must provide the following

Passive Loss Limitations. If you have an overall

Figuring the Prior Year Losses.

information with respect to the disposition

loss from passive activities and you report a loss

You had a net IRC Section 1231 loss if your

of business property if an IRC Section 179

on an asset used in a passive activity, get form

IRC Section 1231 losses exceeded your IRC

expense deduction was claimed in prior years:

FTB 3801, Passive Activity Loss Limitations, or

Section 1231 gains. Gains are included only to

form FTB 3802, Corporate Passive Activity Loss

the extent taken into account in figuring gross

• Description of the property.

and Credit Limitations, to see how much of the

income. Losses are included only to the extent

• Date the property was acquired and placed

loss is allowed before entering it on Schedule D-1.

taken into account in figuring taxable income,

in service.

Gains from assets used in a passive activity

except that the limitation on capital losses does

• Date of the sale or other disposition of

should be reported on Schedule D-1 but should

not apply. See IRC Sections 1231(c)(5) and

the property.

also be reported on form FTB 3801 or form

1231(a)(4).

• Gross sales price or amount realized.

FTB 3802 to offset losses, if any, from other

• Cost or other basis plus expense of sale

Line 9 – If line 9 is zero, enter the amount from

passive activities.

(reduced as explained in the instructions

line 7 on line 12. All of your IRC Section 1231

for federal Form 4797, line 21).

Unused passive activity credits are not allowable

gain is treated as ordinary income. For record

• Depreciation allowed or allowable

when you dispose of part of your interest in an

keeping purposes, the amount on line 7 is

(determined as described in the

activity. If you dispose of your entire interest in an

also the amount of net IRC Section 1231 loss

instructions for federal Form 4797,

activity, get the instructions for federal Form 4797

recaptured in 2016.

line 22, but excluding the Section 179

for more information.

Part II

expense deduction).

IRC Section 197(f)(9)(B)(ii) Election. If you

If a transaction is not reportable in Part I or

• Amount of IRC Section 179 expense

elected to recognize gain on the disposition of a

Part III and the property is not a capital asset

deduction (if any).

Section 197 intangible and to pay the tax on the

reportable on Schedule D (100, 100S, 100W, 540,

• A statement indicating if the disposition is

gain at the highest tax rate, report the additional

or 540NR), report the transaction in Part II.

due to a casualty or theft.

tax on Form 540, California Resident Income Tax

• If this is an installment sale, any

Line 10 – Report other ordinary gains and

Return, line 63 (or the appropriate line of other

information needed to complete form

losses, including property held one year or less,

income tax returns). Write “IRC Section 197” and

FTB 3805E.

on this line.

the amount of the Section 197 tax on the dotted

• S Corporations. Gain on property subject

line to the left of the amount.

Individuals also report ordinary losses from the

to the IRC Section 179 expense deduction

sale or exchange (including worthlessness) of IRC

For information about at-risk rules and the

recapture must be included in the taxable

Section 1244 (small business) stock on this line.

exclusion of gain on the sale of a home used

income of the S corporation. To accomplish

for business, get the instructions for federal

Line 12 – If line 9 is zero, enter the amount

this, the S corporation should complete

Form 4797.

from line 7. If line 9 is more than zero, enter the

two sets of Schedule D-1 and Schedule D

amount from line 8.

(100S). One set of Schedule D-1 and Schedule

Specific Line Instructions

Line 15 – Enter any ordinary gain from

D (100S) will include the gain or loss from the

installment sales from form FTB 3805E, line 25

Part I

sale or disposition of IRC Section 179 assets

or line 36. This line applies only to sales of IRC

as well as gain or loss from non-Section 179

Use Part I to report sales or exchanges of trade

Sections 1252, 1254, and 1255 property, and

business assets, and will be reported on

or business property and certain involuntary

IRC Sections 1245 and 1250 property if you are

Form 100S, Side 1, line 4. Indicate at the

conversions, such as condemnations of trade

still reporting ordinary gain from sales before

top of this Schedule D-1 and Schedule D

or business property and of capital assets held

June 7, 1984.

(100S) “IRC Sec. 179 and Business Assets.”

more than one year. If any of the recognized

When completing Schedule D-1 and

Line 18 – Enter the difference between ordinary

losses were from involuntary conversions arising

Schedule D (100S) for the Form 100S, skip

federal gains or (losses) from line 18 on your tax

from fire, storm, shipwreck, theft, or other

any instructions to report the gain or loss on

return as follows:

casualty, and they exceed the recognized gains

Schedule K (100S) or Schedule K-1 (100S).

from the conversions, do not include them when

Corporations: Form 100, California Corporation

figuring your nonrecapture net IRC Section 1231

The second set of Schedule D-1 and

Franchise or Income Tax Return, or Form 100W,

losses. You may have to complete Part III

Schedule D (100S) is to report the gain or

California Corporation Franchise or Income

before you complete Part I if depreciable and

loss on non-Section 179 business assets

Tax Return - Water’s-Edge Filers, line 8, other

certain amortizable property (farm, oil, or gas)

for use on the Schedules K (100S) and K-1

additions; or line 15, other deductions.

was disposed of at a gain. For examples of IRC

(100S). To accomplish this, the S corporation

Exempt Organizations: Form 109, California

Section 1231 transactions, get the instructions for

should complete a Schedule D-1 and

Exempt Organization Business Income Tax

federal Form 4797.

Schedule D (100S) with the gain or loss

Return, Part I, line 4b, net gain (loss).

for the non-Section 179 business assets

Line 2, column (f) – Other basis means a basis

S Corporations: Form 100S, line 7, other

only. The amounts from this Schedule D-1

other than cost. There are times when you

additions; or line 12, other deductions. Also, see

and Schedule D (100S) will be reported on

cannot use the cost of the property as the basis.

instructions for Schedule K (100S), line 9 and

Schedules K (100S) and K-1 (100S). Indicate

For example, in situations involving like-kind

line 10b.

at the top of this Schedule D-1 and Schedule D

exchanges, the basis generally will be the basis

(100S) set, “Non-Section 179 Business Assets

Built-In Gains. For California purposes, when

of the property given up in the exchange. Under

Only.”

a C corporation elects to be an S corporation,

other circumstances, you may be required to use

certain items recognized in S corporation years

the fair market value of your property. However,

• Schedule K and Schedule K-1 (565, 568,

are subject to the C corporation tax rate instead of

you may have been required to reduce the basis

and 100S). Details of the sale or other

the S corporation tax rate.

for California purposes. For more information

disposition must be separately reported on

about the differences in California and federal

Schedule K and Schedule K-1(565, 568,

Built-in gains are reported on Schedule D (100S).

basis, get FTB Pub. 1001.

or 100S) as supplemental information as

Get the Form 100S, S Corporation Tax Booklet for

instructed in federal Form 4797, under

additional information.

Line 8 – Part or all of your IRC Section 1231

“Disposition by a Partnership or S Corporation

gains on line 7 may be taxed as ordinary income

Partnerships and Limited Liability Companies:

of Section 179 Property”.

instead of receiving capital gain treatment.

See instructions for Schedule K and Schedule K-1

These net IRC Section 1231 gains are treated

Partners, Members, and S corporation

(565 or 568), lines 10a and 10b, and lines 11b

as ordinary income to the extent of the

Shareholders. If you receive a Schedule K-1

and 11c.

“nonrecaptured IRC Section 1231 losses.” The

(565, 568, or 100S) reporting the sale or

Line 18a – If the amount of your California

nonrecaptured IRC Section 1231 losses are net

other disposition of property for which an

casualty and theft loss is not the same as the

IRC Section 1231 losses deducted during the

IRC Section 179 expense deduction was

amount of your federal casualty and theft loss,

five preceding tax years that have not yet been

previously claimed, you must report your share

enter the difference on Schedule CA (540 or

applied against any net IRC Section 1231 gain

of the transaction on Schedule D-1 or federal

540NR), California Adjustments, line 41.

to determine how much gain is ordinary income

Form 4797. Follow the instructions in the federal

under these rules. Treat the amount of loss as a

Form 4797 under “Disposition by a Partnership or

positive number.

S Corporation of Section 179 Property”.

Page 2 Schedule D-1 Instructions 2016

Instructions For Schedule D-1 - Sales Of Business Property - 2016 Page 2

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