Fillable California Schedule D (565) - Capital Gain Or Loss

Instructions for Schedule D (565)

Capital Gain or Loss

General Information

Qualified Small Business Stock

In Cutler . v . Franchise Tax Board (2012) 208 Cal App 4th 1247,

In general, for taxable years beginning on or after January 1, 2010,

146 Cal Rptr . 3d 244, the California Court of Appeal found that the

California law conforms to the Internal Revenue Code (IRC) as of

California qualified small business stock (QSBS) provisions of R&TC

January 1, 2009 . However, there are continuing differences between

Sections 18038 .5 and 18152 .5 discriminated against interstate

California and federal law . When California conforms to federal tax law

commerce in violation of the Commerce Clause of the United States

changes, we do not always adopt all of the changes made at the federal

Constitution . R&TC Sections 18038 .5 and 18152 .5 provided for a

level . For more information, go to ftb.ca.gov and search for conformity .

California deferral and exclusion of gain from the sale of QSBS if

Additional information can be found in FTB Pub . 1001, Supplemental

eighty percent of the corporation’s property and payroll was located

Guidelines to California Adjustments, the instructions for California

in California for substantially all of the taxpayer’s holding period of

Schedule CA (540 or 540NR), and the Business Entity tax booklets .

the stock . An unconstitutional statute is invalid and unenforceable .

The instructions provided with California tax forms are a summary of

Therefore, the California deferral and exclusion are not available .

California tax law and are only intended to aid taxpayers in preparing

their state income tax returns . We include information that is most useful

to the greatest number of taxpayers in the limited space available . It is

not possible to include all requirements of the California Revenue and

Taxation Code (R&TC) in the tax booklets . Taxpayers should not consider

the tax booklets as authoritative law .

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 .

Schedule D (565) Instructions 2012 Page 1

California Schedule D (565) - Capital Gain Or Loss - 2012 Page 2

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