Instructions for Schedule D-1
Sales of Business Property
(Also, involuntary conversions and recapture amounts under IRC Sections 179 and 280F and R&TC Sections 17267.2, 17267.6, 17268, 24356.6, 24356.7, and 24356.8).
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).
5. The recapture of IRC Section 179 and R&TC
Partners, members, and S corporation
Sections 17267.2, 17267.6, and 17268
shareholders who receive a Schedule K-1 (565,
In general, for taxable years beginning on or after
deductions for partners, members, and
568, or 100S), Share of Income, Deductions,
January 1, 2010, California law conforms to the
S corporation shareholders from property
Credits, etc., showing such disposition must also
Internal Revenue Code (IRC) as of January 1,
distributions by partnerships, LLCs classified
follow these instructions to report the transaction.
2009. However, there are continuing differences
as partnerships, and S corporations,
Partnerships, LLCs, and S Corporations.
between California and federal law. When
respectively. See IRC Section 179 Recapture
California conforms to federal tax law changes,
Gains or losses from the sale or disposition of
under General Information B, Special Rules,
we do not always adopt all of the changes
assets previously subject to the IRC Section 179
for the reporting requirements.
made at the federal level. For more information,
expense deduction are to be reported on
6. The computation of recapture amounts under
go to ftb.ca.gov and search for conformity.
Form 565, Partnership Return of Income;
IRC Sections 179 and 280F when the business
Additional information can be found in FTB
Form 568, Limited Liability Company Return of
use of IRC Section 179 or 280F property
Pub. 1001, Supplemental Guidelines to California
Income; or Form 100S, S Corporation Franchise
drops to 50% or less and for property that
Adjustments, the instructions for California
or Income Tax Return, and on the corresponding
ceases to be “qualified property” under R&TC
Schedule CA (540 or 540NR), and the Business
Schedules K (565, 568, or 100S) and K-1 (565,
Sections 17267.2, 17267.6, 17268, 24356.6,
Entity tax booklets.
568, or 100S).
24356.7, and 24356.8.
The instructions provided with California tax
• Partnerships. Follow the instructions for
B Special Rules
forms are a summary of California tax law and are
federal Form 4797 under “Disposition by a
only intended to aid taxpayers in preparing their
Partnership or S Corporation of Section 179
Combined Reporting Groups. Each corporation
state income tax returns. We include information
Property” to report the transaction on
that is a member of a combined reporting
that is most useful to the greatest number of
the partnership tax return (including the
group should complete this form to report its
taxpayers in the limited space available. It is
Schedules K (565) and K-1 (565) reporting
share of business gains and losses apportioned
not possible to include all requirements of the
to California and its nonbusiness gains and
California Revenue and Taxation Code (R&TC) in
• LLCs. The gain on the property subject to the
losses that are allocated to California. For
the tax booklets. Taxpayers should not consider
IRC Section 179 expense deduction recapture
more information, see Cal. Code Regs., tit. 18
the tax booklets as authoritative law.
must be included in the total income for the
section 25106.5-2 and FTB Pub. 1061, Guidelines
Partnerships, Limited Liability Companies
LLC. Report the gain on property subject
for Corporations Filing a Combined Report.
(LLCs) classified as partnerships,
to the IRC Section 179 expense deduction
Casualties and Thefts. Complete and attach
S corporations, and their partners, members,
recapture on Schedule K (565 or 568),
federal Form 4684, Casualties and Thefts, using
and shareholders, must follow the new
procedures for reporting all sales or other
The LLC must provide the following
Exchange of “Like-Kind” Property. Complete and
dispositions of property for which the IRC
information with respect to the disposition
attach federal Form 8824, Like-Kind Exchanges,
Section 179 expense deduction was claimed.
of business property if an IRC Section 179
using California amounts.
See Property Subject to IRC Section 179
expense deduction was claimed in prior years:
Expense Deduction Recapture, under General
Report the exchange of like-kind property,
• Description of the property.
Information B, Special Rules, for details.
even if no gain or loss is recognized. Write
• Date the property was acquired and placed
“Like-Kind Exchange from Form 8824” as the
property description, and enter the gain or loss,
• Date of the sale or other disposition of the
Use Schedule D-1, Sales of Business Property, to
if any, from federal Form 8824 (using California
report the sale or exchange of business property
amounts) on line 5 or line 16, whichever applies.
• Gross sales price or amount realized.
when the California basis of the asset(s) is
If an exchange was made with a related party,
• Cost or other basis plus expense of sale
different from the federal basis due to differences
write “Related Party Like-Kind Exchange” in the
(reduced as explained in the instructions
between California and federal law.
top margin of Schedule D-1.
for federal Form 4797, line 21).
Complete and attach this form to your tax return
Installment Sales. If you sold property at a gain
• Depreciation allowed or allowable
only if your California gains or losses from the
and you will receive a payment in a tax year after
(determined as described in the
sale or exchange of assets used in a trade or
the year of sale, you must report the sale on the
instructions for federal Form 4797, line 22,
business are different from your federal gains or
installment method unless you elect not to do so.
but excluding the Section 179 expense
losses. (For common examples of items to report
For nonresidents, or part-year residents, who
on this schedule, see the instructions for federal
• Amount of IRC Section 179 expense
change their residency, get FTB Pub. 1100,
Form 4797, Sales of Business Property.)
deduction (if any).
Taxation of Nonresidents and Individuals Who
• A statement indicating if the disposition is
Use this form to report:
Change Residency, to help determine their taxable
due to a casualty or theft.
income from an installment sale.
1. The sale or exchange of:
• If this is an installment sale, any
Use form FTB 3805E, Installment Sale Income,
• Trade or business property
information needed to complete form
to report the sale on the installment method.
• Depreciable and amortizable property
Also use form FTB 3805E to report any payment
• Oil, gas, and geothermal property
• S Corporations. Gain on property subject
received in 2013 from a previous installment sale.
• IRC Section 126 property
to the IRC Section 179 expense deduction
If you elect not to use the installment method for
2. The involuntary conversion (other than
recapture must be included in the taxable
California, report the full amount of the gain on a
casualty or theft) of trade or business property
income of the S corporation. To accomplish
timely filed tax return (including extensions).
and capital assets held in connection with a
this, the S corporation should complete two
trade or business or a transaction entered into
Property Subject to IRC Section 179 Expense
sets of Schedule D-1 and Schedule D (100S).
Deduction Recapture. Partnerships, LLCs
One set of Schedule D-1 and Schedule D
classified as partnerships, and S corporations
(100S) will include the gain or loss from the
3. The disposition of noncapital assets (other
that sell or otherwise dispose of property for
sale or disposition of IRC Section 179 assets
than inventory or property held primarily for
which an IRC Section 179 expense deduction
as well as gain or loss from non-Section 179
sale to customers in the ordinary course of
was previously claimed and passed through
business assets, and will be reported on
your trade or business).
to the partners, members, or S corporation
Form 100 S, Side 1, line 4. Indicate at the
4. The disposition of capital assets not reported
shareholders must follow these instructions to
top of this Schedule D-1 and Schedule D
on Schedule D (100, 100S, 100W, 540, or
report the transaction.
(100S) “IRC Sec. 179 and Business Assets.”
540NR), Capital Gain or Loss Adjustment.
Schedule D-1 Instructions 2013 Page 1