Form 561-C - Oklahoma Capital Gain Deduction For Corporations Filing Form 512 - 2006 Page 2
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2Oklahoma Capital Gain Deduction for Corporations Filing Form 512
Title 68 O.S. Section 2358 and Rule 710:50-15-48
General Information
Corporate taxpayers can deduct qualifying gains receiving capital gain treatment which are included in Federal taxable
income. “Qualifying gains receiving capital treatment” means the amount of net capital gains, as defined under Internal
Revenue Code Section 1222(11). The qualifying gain must be earned:
1.
by the corporation on real or tangible personal property located within Oklahoma that has been owned for at least five
uninterrupted years prior to the date of the transaction that gave rise to the capital gain; or
2.
on the sale of stock or an ownership interest in an Oklahoma company, limited liability company, or partnership where
such stock or ownership interest has been owned for at least three uninterrupted years prior to the date of the sale.
An Oklahoma company, limited liability company or partnership is an entity whose primary headquarters has been
located in Oklahoma for at least three uninterrupted years prior to the date of sale.
A capital loss carryover from qualified property reduces the current year gains from eligible property.
Pass-through entities...
Capital gain from qualifying property, as described above, held by a pass-through entity is eligible for the Oklahoma capital
gain deduction, provided the corporation has been a member of the pass-through entity for an uninterrupted period of the
applicable three or five years and the pass-through entity has held the asset for not less than the applicable three or five
uninterrupted years prior to the date of the transaction that created the capital gain. The type of asset sold, as shown in 1 and
2 above, determines whether the applicable number of uninterrupted years is three or five. The pass-through entity must
provide supplemental information to the corporation identifying the pass-through of qualifying capital gains.
Installment sales...
Qualifying gains included in a corporate taxpayer’s Federal taxable income for the current year, which are derived from
installment sales, are eligible for exclusion provided the appropriate holding periods are met.
Specific Instructions
Lines 1 - 7 are used to determine the qualifying Oklahoma net capital gain. The qualifying Oklahoma net capital gain is the
long-term gains from qualifying Oklahoma property minus long-term losses from qualifying Oklahoma property which were
allocated or apportioned to Oklahoma. Line 8 is the net capital gain. Net capital gain is the excess of the net long-term
capital gain over the net short-term capital loss allocated or apportioned to Oklahoma. The Oklahoma Capital Gain Deduction
cannot exceed this amount.
Note: If less than 100% of a capital gain or loss has been apportioned to Oklahoma, include only such portion in Column F.
For example: on Form 512, Schedule B, a corporation apportions 43% of the capital gain/loss to Oklahoma (based on the
apportionment formula), it would then include 43% of the gain/loss. However, if 100% of the gain/loss was allocated to
Oklahoma; then include 100% of such gain/loss.
Line 1: List qualifying Oklahoma capital gains and losses from the Federal Schedule D, line 6. In Column A , line A1 enter the
description of the property as shown in Federal Column A and on line A2 enter either the Oklahoma location of the real or
tangible personal property sold or the Federal Identification Number of the company, limited liability company or partnership
whose stock or ownership interest was sold. Complete Columns B through E using the information from the corresponding
columns of the Federal Schedule D. In Column F enter the qualifying Oklahoma capital gain or loss allocated or apportioned
to Oklahoma. Do not include gains and losses reported on Form 561-C lines 2 through 4.
Line 2: Enter the qualifying Oklahoma net capital gain allocated or apportioned to Oklahoma which was reported on Federal
Schedule D, from the Federal Form 4797. Enclose a copy of the Federal Form 4797.
Line 3: If Federal Form 6252 was used to report the installment method for gain on the sale of eligible property on the
Federal return, compute the capital gain deduction using the current year’s taxable portion of the installment payment which
was allocated or apportioned to Oklahoma. Enclose Federal Form 6252. Capital gain from an installment sale is eligible for
the Oklahoma capital gain deduction provided the property was held for the appropriate holding period as of the date sold.
Line 4: Enter the qualifying Oklahoma net capital gain or loss allocated or apportioned to Oklahoma which was reported on
Federal Schedule D, line 9. Enclose a copy of the Federal Form 8824.
Line 6: Enter the total qualifying Oklahoma capital loss, carried over/back from another year’s return, allocated or apportioned
to Oklahoma which was reported on Federal Schedule D, line 4.
Line 8: The Oklahoma capital gain deduction may not exceed the portion of the net capital gain allocated or apportioned to
Oklahoma. The term “net capital gain” means the excess of the net long-term capital gain for the taxable year over the net
short-term capital loss for such year. If there is a net capital loss, enter zero.
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