Instructions For Schedule D-1 - Sales Of Business Property

Specific Line Instructions

When completing Schedule D-1 and

Individuals also report ordinary losses from the

Schedule D (100S) for the Form 100S, skip

sale or exchange (including worthlessness) of IRC

Part I

any instructions to report the gain or loss on

Section 1244 (small business) stock on this line.

Schedule K (100S) or Schedule K-1 (100S).

Use Part I to report sales or exchanges of trade

Line 12 – If line 9 is zero, enter the amount

or business property and certain involuntary

The second set of Schedule D-1 and Schedule D

from line 7. If line 9 is more than zero, enter the

conversions, such as condemnations of trade

(100S) is to report the gain or loss on

amount from line 8.

or business property and of capital assets held

non-Section 179 business assets for use on

Line 15 – Enter any ordinary gain from

more than one year. If any of the recognized

the Schedules K (100S) and K-1 (100S). To

installment sales from form FTB 3805E, line 25

losses were from involuntary conversions arising

accomplish this, the S corporation should

or line 36. This line applies only to sales of IRC

from fire, storm, shipwreck, theft, or other

complete a Schedule D-1 and Schedule D (100S)

Sections 1252, 1254, and 1255 property, and IRC

casualty, and they exceed the recognized gains

with the gain or loss for the non-Section 179

Sections 1245 and 1250 property if you are still

from the conversions, do not include them when

business assets only. The amounts from this

reporting ordinary gain from sales before June 7,

figuring your nonrecapture net IRC Section 1231

Schedule D-1 and Schedule D (100S) will

1984.

losses. You may have to complete Part III

be reported on Schedules K (100S) and K-1

Line 18 – Enter the difference between ordinary

before you complete Part I if depreciable and

(100S). Indicate at the top of this Schedule D-1

federal gains or (losses) from line 18 on your tax

certain amortizable property (farm, oil, or gas)

and Schedule D (100S) set, “Non-Section 179

return as follows:

was disposed of at a gain. For examples of IRC

Business Assets Only.”

Section 1231 transactions, get the instructions for

• Schedule K and Schedule K-1 (565, 568, and

Corporations: Form 100, California Corporation

federal Form 4797.

100S). Details of the sale or other disposition

Franchise or Income Tax Return, or Form 100W,

must be separately reported on Schedule K

California Corporation Franchise or Income

Line 2, column (f) – Other basis means a basis

and Schedule K-1(565, 568, or 100S) as

Tax Return - Water’s-Edge Filers, line 8, other

other than cost. There are times when you

supplemental information as instructed in

additions; or line 16, other deductions.

cannot use the cost of the property as the basis.

federal Form 4797, under Disposition by a

For example, in situations involving like-kind

Exempt Organizations: Form 109, California

Partnership or S Corporation of Section 179

exchanges, the basis generally will be the basis

Exempt Organization Business Income Tax

Property.

of the property given up in the exchange. Under

Return, Part I, line 4b, net gain (loss).

other circumstances, you may be required to use

Partners, Members, and S corporation

S Corporations: Form 100S, line 7, other

the fair market value of your property. However,

Shareholders. If you receive a Schedule K-1

additions; or line 13, other deductions. Also, see

you may have been required to reduce the basis

(565, 568, or 100S) reporting the sale or

instructions for Schedule K (100S), line 9 and

for California purposes. For example, if you took

other disposition of property for which an

line 10b.

the business expense deduction for enterprise

IRC Section 179 expense deduction was

Built-In Gains. For California purposes, when

zones (including former program areas) or a local

previously claimed, you must report your share

a C corporation elects to be an S corporation,

agency military base recovery area, you may be

of the transaction on Schedule D-1 or federal

certain items recognized in S corporation years

required to make a basis adjustment. For more

Form 4797. Follow the instructions in the federal

are subject to the C corporation tax rate instead of

information about the differences in California and

Form 4797 under Disposition by a Partnership or

the S corporation tax rate.

federal basis, get FTB Pub. 1001.

S Corporation of Section 179 Property.

Built-in gains are reported on Schedule D (100S),

Line 8 – Part or all of your IRC Section 1231

Passive Loss Limitations. If you are a

S Corporation Capital Gains and Losses and

gains on line 7 may be taxed as ordinary income

nonresident or part-year resident, your calculation

Built-In Gains. Get the Form 100S, S Corporation

instead of receiving capital gain treatment.

may change as a result of Assembly Bill 1115

Tax Booklet for additional information.

These net IRC Section 1231 gains are treated

(Stats. 2001, Ch. 920). Get FTB Pub. 1100.

as ordinary income to the extent of the

Partnerships and Limited Liability Companies:

If you have an overall loss from passive activities

“nonrecaptured IRC Section 1231 losses.” The

See instructions for Schedule K and Schedule K-1

and you report a loss on an asset used in a

nonrecaptured IRC Section 1231 losses are net

(565 or 568), lines 10a and 10b, and lines 11b

passive activity, get form FTB 3801, Passive

IRC Section 1231 losses deducted during the

and 11c.

Activity Loss Limitations, or form FTB 3802,

five preceding tax years that have not yet been

Line 18a – If the amount of your California

Corporate Passive Activity Loss and Credit

applied against any net IRC Section 1231 gain

casualty and theft loss is not the same as the

Limitations, to see how much of the loss is

to determine how much gain is ordinary income

amount of your federal casualty and theft loss,

allowed before entering it on Schedule D-1. Gains

under these rules. Treat the amount of loss as a

enter the difference on Schedule CA (540 or

from assets used in a passive activity should be

positive number.

540NR), California Adjustments, line 41.

reported on Schedule D-1 but should also be

Figuring the Prior Year Losses.

reported on form FTB 3801 or form FTB 3802 to

Line 21 – Compare your federal amount entered

offset losses, if any, from other passive activities.

You had a net IRC Section 1231 loss if your

on line 19 with your California amount entered

IRC Section 1231 losses exceeded your IRC

on line 20. If the amount on line 19 is more than

Unused passive activity credits are not allowable

Section 1231 gains. Gains are included only to

the amount on line 20, enter the difference on

when you dispose of part of your interest in an

the extent taken into account in figuring gross

line 21(a) and on Schedule CA (540 or 540NR),

activity. If you dispose of your entire interest in an

income. Losses are included only to the extent

line 14, column B. If the amount on line 20 is

activity, get the instructions for federal Form 4797

taken into account in figuring taxable income,

more than the amount on line 19, enter the

for more information.

except that the limitation on capital losses does

difference on line 21(b) and on Schedule CA (540

IRC Section 197(f)(9)(B)(ii) Election. If you

not apply. See IRC Sections 1231(c)(5) and

or 540NR), line 14, column C.

elected to recognize gain on the disposition of a

1231(a)(4).

Part III

Section 197 intangible and to pay the tax on the

Line 9 – If line 9 is zero, enter the amount from

gain at the highest tax rate, report the additional

Generally, do not complete Part III for property

line 7 on line 12. All of your IRC Section 1231 gain

tax on Form 540, California Resident Income Tax

held one year or less; use Part II instead.

is treated as ordinary income. For record keeping

Return, line 63 (or the appropriate line of other

purposes, the amount on line 7 is also the amount

Use Part III to compute recapture of depreciation

income tax returns). Write “IRC Section 197” and

of net IRC Section 1231 loss recaptured in 2013.

and certain other items that must be reported as

the amount of the Section 197 tax on the dotted

ordinary income upon the disposition of property.

line to the left of the amount.

Part II

Complete line 22 through line 27 to determine

For information about at-risk rules and the

If a transaction is not reportable in Part I or

the gain on the disposition of the property. If

exclusion of gain on the sale of a home used

Part III and the property is not a capital asset

you have more than 4 transactions to report, use

for business, get the instructions for federal

reportable on Schedule D (100, 100S, 100W, 540,

additional forms.

Form 4797.

or 540NR), report the transaction in Part II.

For examples of IRC Sections 1245, 1250, 1252,

Line 10 – Report other ordinary gains and

1254, and 1255 property, see instructions for

losses, including property held one year or less,

federal Form 4797.

on this line.

Line 25 – Taxpayers other than partnerships,

LLCs, or S corporations, complete the following

steps to figure the amount to enter on line 25.

Page 2 Schedule D-1 Instructions 2013

Instructions For Schedule D-1 - Sales Of Business Property - 2013 Page 2

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