Form 4797n - Special Capital Gains/extraordinary Dividend Election And Computation - 2012 Page 5
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6OTHER CORPORATIONS. The election also applies to the capital stock of other corporations that are related to the elected
corporation, such as a parent or subsidiary. Brother-sister corporations do not qualify under the same election. The election
also applies to the capital stock of a corporation that was a party to a tax-free reorganization with the elected corporation
that occurred during or after the time the employee was employed by the elected corporation. If the name of the corporation
is not the same as the name on the election, include an explanation of how the named corporation is a qualified corporation.
PAGE I — GENERAL INSTRUCTIONS
MULTIPLE SALES OF CAPITAL STOCK FROM ONE EMPLOYEE. When multiple sales of capital stock from one
employee were made during the tax year, combine all sales onto a single Page 1 to determine the exclusion.
SALES OF CAPITAL STOCK FROM MORE THAN ONE EMPLOYEE. When multiple sales of capital stock from
more than one employee were made during the tax year, whether the spouse is also an employee or the capital stock was
gifted, complete a separate Page 1 for each employee’s capital stock. The separate Page 1's must be completed through line
3. Then, consolidate the amounts on lines 4 through 8 on a single Page 1.
MULTIPLE EXTRAORDINARY DIVIDENDS. One extraordinary dividend may be included on the same Page 1 as a
special capital gains exclusion if it is from capital stock from the same employee. A separate Page 1 is required for each
additional extraordinary dividend declared during the year.
PAGE I — SPECIFIC INSTRUCTIONS
NAME OF PERSON MAKING ELECTION. If the election is being made on this return, enter the phrase “See Part I.” If
an election was previously made, attach a copy of the Form 4797N where the initial election was previously made either by
you or the qualified person.
NAME OF THE CORPORATION ISSUING THE CAPITAL STOCK. Enter the name of the corporation that issued
the capital stock. If capital stock issued by more than one corporation is included under the same election, list the names of
all corporations.
If the name of the corporation which issued the stock is different than the corporation name appearing on line 4 of the Part I
election, attach an explanation as to how the corporations are related, and why the gain or dividend being excluded qualifies
for the income exclusion.
DESCRIPTION OF THE CAPITAL STOCK. Enter the description of the capital stock (for example, “100 shares of 7%
preferred voting stock”).
IF THE CAPITAL STOCK WAS NOT ACQUIRED WHILE EMPLOYED. If the date the capital stock was acquired is
not during employment dates, attach an explanation of how the capital stock was acquired because of either employment or
while employed by the corporation.
LINE 1, Sales Price of the Capital Stock. Enter the sales price of the capital stock as shown on the Federal Form 8949.
If a broker advised that the gross proceeds (gross sales price) less commission and option premium were reported to the
Internal Revenue Service, enter the net amount on line 1. Do not include the commission and option premium on line 2.
LINE 2, Cost or Other Basis in Capital Stock. In general, the “cost or other basis” is the cost of the capital stock as
shown on the Federal Form 8949. If cash cost was not used as a basis, attach an explanation of your basis.
When selling capital stock, adjust your basis by subtracting all the nontaxable distributions received before the sale. Also,
adjust the basis for any stock splits.
Increase the basis by any expenses of the sale such as broker’s fees, commissions, and option premiums before making an
entry on line 2, unless net sales price was reported on line 1.
LINE 3, Capital Gains on Sales of Capital Stock During this Year. Enter the amount of the capital gains on
qualifying capital stock transactions this year.
1. Distributions considered ordinary income or reported on Form W-2, and not on Federal Form 8949, do not qualify.
2. Losses on the qualifying capital stock must be netted against gains on the qualifying capital stock to determine the
amount to enter on line 3.
LINE 4, Capital Gains Exclusion Deferred from a Prior Year. Enter the amount of the qualified capital gain on
transactions in prior years that was carried forward.
LINE 6, Limitation on Capital Gains Exclusion. If line 13, Federal Form 1040, or line 4, Federal Form 1041, is a capital
gain, add that amount to $3,000 ($1,500 if married, filing separately). Enter the result on line 6 of this form. If the amount is
a capital loss, enter $3,000 ($1,500 if married, filing separately) less the amount of the loss.
CAUTION – The amount on line 6 of this form cannot be:
1. Less than zero; or
2. Greater than Tax Table Income, line 14 from Form 1040N, without the exclusion.
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