Form 4797n - Nebraska Special Capital Gains/extraordinary Dividend Election And Computation - 2014 Page 6
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6LINE 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 Nebraska Taxable Income, line 14 from Form 1040N, without the exclusion.
Line 8, Capital Gains Exclusion Deferred to Next Year. If line 5 is greater than line 7 on this form, subtract line 7 from
line 5. This is the qualified gain that may be carried over and excluded in future years. If line 5 is less than line 7, enter (-0-).
Line 10, Enter the Amount of the Dividend Received. Do not include any distribution or the portion of a distribution
that is not treated as a dividend on the federal return, such as a return of capital.
Line 11, Total Extraordinary Dividends Available for Exclusion. For the extraordinary dividend exclusion to be
eligible, the dividend must be greater than 20% of the fair market value of the capital stock on the dividend declaration date.
If more than one extraordinary dividend was received, complete a separate Page 1 for each dividend. Compute the percentage
separately for each dividend and add all of the line 11b amounts on a single line 11c on Page 1.
Part I – Instructions
Part I is only to be completed if an election has never been made for the employee who originally received the stock. If a
previous election has been made for the employee, that is the only election allowed.
The Election
This election may be made for the capital stock of one corporation. The election may only be made once for an individual
and once made, the election may not be changed. The election may be made even if there is no sale or exchange of stock, or
no extraordinary dividend is received. Each spouse may make their own election and it may be for a different corporation.
If you are not the employee, use Part II to determine if you qualify to make the election.
Once the election is made for an employee, that election will apply to sales or exchanges of capital stock of the selected
corporation for the employee, the spouse, or descendants. The spouse or descendant must attach a copy of the completed
election for the exclusion to apply.
Line 5. Publicly-traded corporations meet the ownership requirements and lines 6 and 7 do not have to be completed.
Line 6. If you answered No to question 5, the corporation must have at least five shareholders in order to be a
qualified corporation.
Line 7. The qualified corporation must have some unrelated shareholders. If a group of shareholders who are related to each
other, hold more than 90% of the shares of the stock, the company is too closely held to qualify.
Shareholders are related if one is married to, a lineal ancestor or descendent of, or is the brother, sister, aunt, uncle, cousin,
niece, or nephew of another person who owns capital stock either directly or indirectly. Shareholders who are otherwise
unrelated are related if they are each related to the same person.
Part II – Instructions
Part II is only completed when an election has not been previously made, and a person other than the employee needs to make
the election. If the employee is alive, then only the employee can make the election. If the employee died without making the
election, the surviving spouse may make the election provided the election could have been made by the employee.
A surviving spouse is a spouse who was married to the employee on the date of the employee's death.
If there is no surviving spouse, then the oldest living descendant may make the election.
Part III – Instructions
Part III is only completed when a person other than the employee wants to exclude income from the sale or exchange of
qualifying capital stock, or an extraordinary dividend. The election applies to sales or exchanges of qualifying capital stock
when made by the spouse or descendants of the employee.
Line 2. All capital stock owned by the spouse or descendants must have been received from the employee by gift. Any shares
that are inherited, or that were transferred as a result of the death of the employee, are ineligible for the exclusion.
Line 3. The spouse must have been married to the employee at the time of the sale of the capital stock, whether or not
married at the time the return is filed, or the date of death of the employee, if deceased.
Line 4. Shares held by an inter vivos trust created for the benefit of the spouse or descendants qualify for the exclusion if
the exclusion would have applied to shares owned directly by the spouse or descendants at the time of the sale; and if the
rights to the shares in the trust were not changed by the death of the employee. When a trust is claiming the exclusion, please
contact the Nebraska Department of Revenue for specific instructions.
revenue.nebraska.gov, 800-742-7474 (NE and IA), 402-471-5729
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