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FTB Pub. 1100, Taxation of Nonresidents and

local agency military base recovery area, you

use percentage of the property drops to 50%

Individuals Who Change Residency.

may be required to make a basis adjustment.

or less, or if you have R&TC Section 17267.2,

For more information about the differences in

17267.6, 17268, 24356.5, 24356.6, 24356.7,

If you have an overall loss from passive

California and federal basis, get FTB Pub.

or 24356.8 recapture when the property

activities and you report a loss on an asset

1001, Supplemental Guidelines to California

ceases to be qualified property.

used in a passive activity, use form FTB 3801,

Adjustments.

Passive Activity Loss Limitations, or form

Note: If the gain subject to IRC Section 179

FTB 3802, Corporate Passive Activity Loss

Line 8 – Part or all of your IRC Section 1231

expense deduction recapture pertains to

and Credit Limitations, to see how much of

gains on line 7 may be taxed as ordinary

disposition of property by a partnership, LLC

the loss is allowed before entering it on

income instead of receiving capital gain

or S corporation, see the instructions under

Schedule D-1. Gains from assets used in a

treatment. These net IRC Section 1231 gains

General Information B, Special Rules.

passive activity should be reported on

are treated as ordinary income to the extent of

Line 18 – Enter the difference between

Schedule D-1 but should also be reported on

the “nonrecaptured IRC Section 1231 losses.”

ordinary federal gains or (losses) from line 18

form FTB 3801 or form FTB 3802 to offset

The nonrecaptured IRC Section 1231 losses

on your return as follows:

losses, if any, from other passive activities.

are net IRC Section 1231 losses deducted

Corporations: Form 100 or Form 100W, line 8,

during the five preceding tax years that have

Unused passive activity credits are not

other additions; or line 16, other deductions.

not yet been applied against any net IRC

allowable when you dispose of part of your

Exempt Organizations: Form 109, Part I,

Section 1231 gain to determine how much

interest in an activity. If you dispose of your

line 4b, net gain (loss).

gain is ordinary income under these rules.

entire interest in an activity, get the instruc-

Treat the amount of loss as a positive number.

S corporations: Form 100S, line 7, other

tions for federal Form 4797 for more

Figuring the Prior Year Losses.

additions; or line 13, other deductions. Also,

information.

You had a net IRC Section 1231 loss if your

see instructions for Schedule K (100S), line 5

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

IRC Section 1231 losses exceeded your IRC

and line 6.

elected to recognize gain on the disposition of

Section 1231 gains. Gains are included only to

Built-In Gains. For California purposes, when

a Section 197 intangible and to pay the tax on

the extent taken into account in figuring gross

a C corporation elects to be an S corporation,

the gain at the highest tax rate, report the

income. Losses are included only to the extent

certain items recognized in S corporation

additional tax on Form 540, line 36 (or the

taken into account in figuring taxable income,

years are subject to the C corporation tax rate

appropriate line of other income tax returns).

except that the limitation on capital losses

instead of the S corporation tax rate.

Write “IRC Section 197” and the amount of

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

the Section 197 tax on the dotted line to the

Built-in gains are reported on Schedule D

and 1231(a)(4).

left of the amount.

(100S), S Corporation Capital Gains and

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

Losses and Built-In Gains. Get the Form 100S

For information about at-risk rules and the

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

Booklet for additional information.

exclusion of gain on the sale of a home used

gain is treated as ordinary income. For record

for business, get the instructions for federal

Partnerships and Limited Liability Compa-

keeping purposes, the amount on line 7 is also

Form 4797.

nies: See instructions for Schedule K and

the amount of net IRC Section 1231 loss

Schedule K-1 (565 or 568), line 6 and line 7.

recaptured in 2003.

Specific Instructions

Line 18b(1) – If the amount of your California

Part II

casualty and theft loss is not the same as the

Part I

If a transaction is not reportable in Part I or

amount of your federal casualty and theft loss,

Use Part I to report sales or exchanges of

Part III and the property is not a capital asset

enter the difference on Schedule CA (540 or

trade or business property and certain

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

540NR), California Adjustments, line 38.

involuntary conversions, such as condemna-

540, or 540NR), report the transaction in

Line 21 – Compare your federal amount

tions of trade or business property and of

Part II.

entered on line 19 with your California amount

capital assets held more than one year. If any

Line 10 – Report other ordinary gains and

entered on line 20. If the amount on line 19 is

of the recognized losses were from involun-

losses, including property held one year or

more than the amount on line 20, enter the

tary conversions arising from fire, storm,

less, on this line.

difference on line 21(a) and on Schedule CA

shipwreck, or other casualty or from theft, and

Individuals also report ordinary losses from

(540 or 540NR), line 14, column B. If the

they exceed the recognized gains from the

the sale or exchange (including worthless-

amount on line 20 is more than the amount on

conversions, do not include them when

ness) of IRC Section 1244 (small business)

line 19, enter the difference on line 21(b) and

figuring your nonrecapture net IRC Sec-

stock on this line.

on Schedule CA (540 or 540NR), line 14,

tion 1231 losses. You may have to complete

column C.

Part III before you complete Part I if depre-

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

ciable and certain amortizable property, farm

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

Part III

property, or oil or gas property was disposed

the amount from line 8.

Generally, do not complete Part III for

of at a gain. For examples of IRC Section 1231

Line 15 – Enter any ordinary gain from

property held one year or less; use Part II

transactions, see the instructions for federal

installment sales from form FTB 3805E, line

instead.

Form 4797.

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

Part III is used to compute recapture of

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

IRC Sections 1252, 1254, and 1255 property

depreciation and certain other items that must

basis other than cost. There are times when

and IRC Sections 1245 and 1250 property if

be reported as ordinary income upon the

you cannot use the cost of the property as the

you are still reporting ordinary gain from sales

disposition of property. Complete line 22

basis. For example, in situations involving

before 6/7/84.

through line 27 to determine the gain on the

like-kind exchanges, the basis generally will

Line 17 – Enter any recapture of IRC Section

disposition of the property. If you have more

be the basis of the property given up in the

179 or R&TC Sections 17267.2, 17267.6, and

than 4 transactions to report, use additional

exchange. Under other circumstances, you

17268 expense included on Schedule K-1

forms.

may be required to use the fair market value

(565 or 568), line 22, or on Schedule K-1

For examples of IRC Sections 1245, 1250,

of your property. However, you may have been

(100S), line 23, but only if it is due to a

1252, 1254, and 1255 property, see instruc-

required to reduce the basis for California

disposition. Include it only to the extent that

tions for federal Form 4797.

purposes. For example, if you took the

you took a deduction for it in an earlier year.

business expense deduction for enterprise

Line 25 – Taxpayers other than partnerships,

See the instructions for Part IV if you have

zones (including former program areas) or a

LLCs, or S corporations, complete the

IRC Section 179 recapture when the business

Page 2 Schedule D-1 Instructions 2003

Instructions For Schedule D-1 - Sales Of Business Property - State Of California Franchise Tax Board Page 2

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