California Schedule D (Form 565) - Capital Gain Or Loss - 2011 Page 2
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2Instructions for Schedule D (565)
Capital Gain or Loss
General Information
Qualified Small Business Stock
California law does not conform to the federal law changes in regard
In general, for taxable years beginning on or after January 1, 2010,
to the increase in the percentage of the gain exclusion for the sale of
California law conforms to the Internal Revenue Code (IRC) as of
qualified small business stock acquired after February 17, 2009, and
January 1, 2009 . However, there are continuing differences between
before January 1, 2011 . Current California law allows an exclusion of
California and federal law . When California conforms to federal tax law
50% of any gain from the sale or exchange of qualified small business
changes, we do not always adopt all of the changes made at the federal
stock held for more than 5 years . However, for California purposes, at
level . For more information, go to ftb.ca.gov and search for conformity .
least 80% of the issuing corporation’s payroll must be attributable to
Additional information can be found in FTB Pub . 1001, Supplemental
employment located within California, and at least 80% of the value of
Guidelines to California Adjustments, the instructions for California
the corporation’s assets must be used by the corporation to actively
Schedule CA (540 or 540NR), and the Business Entity tax booklets .
conduct one or more qualified trades or businesses in California .
The instructions provided with California tax forms are a summary of
R&TC Section 18038 .5 also provides for the deferral of gain from the
California tax law and are only intended to aid taxpayers in preparing
sale of small business stock that has been held for six months or more,
their state income tax returns . We include information that is most useful
if qualified replacement stock is purchased within 60 days after the sale
to the greatest number of taxpayers in the limited space available . It is
giving rise to the gain . Report gain deferred from the sale of qualified
not possible to include all requirements of the California Revenue and
small business stock in accordance with the instructions contained in
Taxation Code (R&TC) in the tax booklets . Taxpayers should not consider
Revenue Procedure 98-48 .
the tax booklets as authoritative law .
The partnership also must separately state the amount of the gain
Internet Access
that qualifies for the 50% exclusion under R&TC Section 18152 .5 on
You can download, view, and print California tax forms and publications
Schedule K, line 11 . Each partner must determine if he or she qualifies
at ftb.ca.gov.
for the gain at the partner level .
Access other state agencies’ websites at ca.gov.
Purpose
Use Schedule D (565), Capital Gain or Loss, to report the sale or
exchange of capital assets, by the partnership, except capital gains
(losses) that are specially allocated to any partners . Do not use this form
to report the sale of business property . For sales of business properties,
use California Schedule D-1, Sale of Business Property .
Enter specially allocated short-term capital gains (losses) received
from limited liability companies (LLCs) classified as partnerships,
partnerships, S corporations, and fiduciaries on Schedule D (565),
line 3 . Enter specially allocated long-term capital gains (losses) received
from LLCs classified as partnerships, partnerships, S corporations, and
fiduciaries on Schedule D (565), line 7 . Enter short-term and long-term
capital gains (losses) that are specially allocated to partners on
Schedule K-1 (565), Partner’s Share of Income, Deductions, Credits, etc .
Do not include these amounts on Schedule D (565) . See the instructions
for Schedule K (565), Partners’ Share of Income, Deductions, Credits,
etc ., and Schedule K-1 (565) for more information . Also, refer to the
instructions for federal Schedule D (1065), Capital Gains and Losses .
Nonresident and Part-Year Resident Partners, get FTB Pub. 1100,
Taxation of Nonresidents and Individuals Who Change Residency.
With the enactment of AB 1115 (Stats . 2001, Ch 920) capital loss
carryover and capital loss limitations for nonresident partners and
part-year resident partners, for the portion of the year they were
nonresidents, are determined based upon California source income
and loss items only for the computation of their California taxable
income . Moreover, the character of their gains and losses on the sale or
exchange of property used in trade or business or certain involuntary
conversions (IRC Section 1231) are determined for purposes of
calculating their California taxable income by netting California sources
Section 1231 gains and losses only .
California law conforms to federal law for the recognition of gain
on a constructive sale of property in which the partnership held an
appreciated interest .
Page 32 Schedule D (565) Instructions 2011
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