SCHEDULE D OMB No. 1545-0099

(Form 1065) Capital Gains and Losses

Department of the Treasury

Internal Revenue Service

 Attach to Form 1065.

Name of partnership Employer identification number

Short-Term Capital Gains and Losses—Assets Held One Year or Less

(c) Date sold

(month, day, year)

(b) Date acquired

(month, day, year)

(d) Sales price

(see instructions)

(e) Cost or other basis

(see instructions)

(a) Description of property

(e.g., 100 shares

of “Z” Co.)

1

2 Short-term capital gain from installment sales from Form 6252, line 26 or 37

4 Partnership’s share of net short-term capital gain (loss), including specially allocated

short-term capital gains (losses), from other partnerships, estates, and trusts

5

Long-Term Capital Gains and Losses—Assets Held More Than One Year

6

7 Long-term capital gain from installment sales from Form 6252, line 26 or 37

Partnership’s share of net long-term capital gain (loss), including specially allocated

long-term capital gains (losses), from other partnerships, estates, and trusts

9

10 Capital gain distributions

Combine lines 6 through 10 in column (g). Enter here and on Form 1065, Schedule

K, line 4e(2) or 7

11

For Paperwork Reduction Act Notice, see the Instructions for Form 1065. Cat. No. 11393G Schedule D (Form 1065) 2002

Part I

Part II

3

4

5

8

9

10

11

2

3 Short-term capital gain (loss) from like-kind exchanges from Form 8824

8 Long-term capital gain (loss) from like-kind exchanges from Form 8824

7

(c) Date sold

(month, day, year)

(b) Date acquired

(month, day, year)

(d) Sales price

(see instructions)

(g) 28% rate gain

or (loss)

*(see instr. below)

(e) Cost or other basis

(see instructions)

(a) Description of property

(e.g., 100 shares

of “Z” Co.)

(f) Gain or (loss)

((d) minus (e))

(f) Gain or (loss)

((d) minus (e))

Net short-term capital gain or (loss). Combine lines 1 through 4 in column (f).

Enter here and on Form 1065, Schedule K, line 4d or 7

Net long-term capital gain or (loss). Combine lines 6 through 10 in column (f).

Enter here and on Form 1065, Schedule K, line 4e(1) or 7

12

12

*28% rate gain or (loss) includes all “collectibles gains and losses” (as defined in the instructions).

2002
General Instructions

Section references are to the Internal

Revenue Code.

Purpose of Schedule

Note: For more information, see Pub. 544,

Sales and Other Dispositions of Assets.

Enter capital gains (losses) specially

allocated to the partnership as a partner in

other partnerships and from estates and

trusts on Schedule D, line 4 or 9, whichever

applies. Enter capital gains (losses) of the

partnership that are specially allocated to

partners directly on line 4d, 4e(1), 4e(2), 4e(3),

or 7 of Schedules K and K-1, whichever

applies. See How Income Is Shared Among

Partners in the Instructions for Form 1065 for

more information.

What Are Capital Assets?

● Stock in trade or other property included in

inventory or held mainly for sale to

customers.

● Depreciable or real property used in the

trade or business, even if it is fully

depreciated.

● Certain copyrights; literary, musical, or

artistic compositions; letters or memoranda;

or similar property. See section 1221(a)(3).

Use Schedule D (Form 1065) to report sales

or exchanges of capital assets, capital gain

distributions, and nonbusiness bad debts. Do

not report on Schedule D capital gains

(losses) specially allocated to any partners.

Each item of property the partnership held

(whether or not connected with its trade or

business) is a capital asset except:

● U.S. Government publications, including

the Congressional Record, that the

partnership received from the Government,

other than by purchase at the normal sales

price, or that the partnership got from another

taxpayer who had received it in a similar way,

if the partnership’s basis is determined by

reference to the previous owner.

Items for Special Treatment

● Bonds and other debt instruments. See

Pub. 550, Investment Income and Expenses.

● Certain real estate subdivided for sale that

may be considered a capital asset. See

section 1237.

● Gain on the sale of depreciable property to

a more than 50%-owned entity, or to a trust

in which the partnership is a beneficiary, is

treated as ordinary gain.

Schedule D (Form 1065) 2002 Page 2

● If the partnership sold property at a gain

and it will receive a payment in a tax year

after the year of sale, it generally must report

the sale on the installment method unless it

elects not to. However, the installment

method may not be used to report sales of

stock or securities traded on an established

securities market. Use Form 6252,

Installment Sale Income, to report the sale on

the installment method. Also use Form 6252

to report any payment received during the tax

year from a sale made in an earlier year that

was reported on the installment method.

● Gain or loss on options to buy or sell,

including closing transactions. See Pub. 550

for details.

● Gain or loss from a short sale of property.

See Pub. 550 for details.

● Transfer of property to a political

organization if the fair market value of the

property exceeds the partnership’s adjusted

basis in such property. See section 84.

● Any loss on the disposition of converted

wetland or highly erodible cropland that is

first used for farming after March 1, 1986, is

reported as a long-term capital loss on

Schedule D, but any gain on such a

disposition is reported as ordinary income on

Form 4797. See section 1257 for details.

● Transfer of partnership assets and liabilities

to a newly formed corporation in exchange

for all of its stock. See Rev. Rul. 84-111,

1984-2 C.B. 88.

● Any loss from securities that are capital

assets that become worthless during the year

is treated as a loss from the sale or exchange

of a capital asset on the last day of the tax

year.

● Gain from the sale or exchange of stock in

a collapsible corporation is not a capital gain.

See section 341.

● Any loss from a wash sale of stock or

securities (including contracts or options to

acquire or sell stock or securities) cannot be

deducted unless the partnership is a dealer in

stock or securities and the loss was

sustained in a transaction made in the

ordinary course of the partnership’s trade or

business. A wash sale occurs if the

partnership acquires (by purchase or

exchange), or has a contract or option to

acquire, substantially identical stock or

securities within 30 days before or after the

date of the sale or exchange. See section

1091 for more information.

● A nonbusiness bad debt must be treated

as a short-term capital loss and can be

deducted only in the year the debt becomes

totally worthless. For each bad debt, enter

the name of the debtor and “schedule

attached” in column (a) of line 1 and the

amount of the bad debt as a loss in column

(f). Also attach a statement of facts to

support each bad debt deduction.

● Gain on the sale or exchange of stock in

certain foreign corporations. See section

1248.

● Liquidating distributions from a corporation.

See Pub. 550 for details.

● Disposition of foreign investment in a U.S.

real property interest. See section 897.

● Any loss from a sale or exchange of

property between the partnership and certain

related persons is not allowed, except for

distributions in complete liquidation of a

corporation. See sections 267 and 707(b) for

details.

● Nonrecognition of gain on sale of stock to

an employee stock ownership plan (ESOP) or

an eligible cooperative. See section 1042 and

Temporary Regulations section 1.1042-1T for

rules under which the partnership may elect

not to recognize gain from the sale of certain

stock to an ESOP or an eligible cooperative.

Other Forms The Partnership

May Have To File

● Sales or exchanges of property used in a

trade or business.

● Involuntary conversions (other than from

casualties or thefts).

Use Form 4797, Sales of Business Property,

to report:

Use Form 4684, Casualties and Thefts, to

report involuntary conversions of property due

to casualty or theft.

Use Form 6781, Gains and Losses From

Section 1256 Contracts and Straddles, to

report gains and losses from section 1256

contracts and straddles. If there are limited

partners, see section 1256(e)(4) for the

limitation on losses from hedging

transactions.

Use Form 8824, Like-Kind Exchanges, if

the partnership made one or more like-kind

exchanges. A “like-kind exchange” occurs

when business or investment property is

exchanged for property of a like kind.

If the partnership wants to elect out of the

installment method for installment gain that is

not specially allocated among the partners, it

must report the full amount of the gain on a

timely filed return (including extensions).

● Accounts or notes receivable acquired in

the ordinary course of the trade or business

for services rendered or from the sale of

stock in trade or other property held mainly

for sale to customers.

● Certain commodities derivative financial

instruments held by a dealer. See section

1221(a)(6).

● Certain hedging transactions entered into in

the normal course of the trade or business.

See section 1221(a)(7).

● Supplies regularly used in the trade or

business.

● Sales or exchanges of depreciable or

amortizable property.

● Sales or other dispositions of securities or

commodities held in connection with a

trading business, if the partnership made a

mark-to-market election (see page 5 of the

instructions for Form 1065).

● The disposition of noncapital assets (other

than inventory or property held primarily for

sale to customers in the ordinary course of a

trade or business).

● Transactions by a securities dealer. See

section 1236.

For a long-term capital gain, report the

full amount of the gain on Schedule K, line

4e(1) or 7. Report the 28% rate gain (i.e.,

collectibles gain, as defined on page 4) on

line 4e(2). Report the qualified 5-year gain on

line 4e(3).

1. For a short-term capital gain, report

the full amount of the gain on Schedule K,

line 4d or 7.

If the partnership wants to elect out of the

installment method for installment gain that is

specially allocated among the partners, it

must do the following on a timely filed return

(including extensions):
Schedule D (Form 1065) 2002 Page 3

2. Enter each partner’s share of the full

amount of the gain on Schedule K-1, line 4d,

4e(1), or 7, whichever applies. Report the

28% rate gain, if any, on line 4e(2). Report

the qualified 5-year gain on line 4e(3).

To be qualified small business stock, the

stock must meet all of the following tests:

● It must be stock in a C corporation (that is,

not S corporation stock).

● It must have been originally issued after

August 10, 1993.

● As of the date the stock was issued, the

corporation was a qualified small business. A

qualified small business is a domestic C

corporation with total gross assets of $50

million or less (a) at all times after August 9,

1993, and before the stock was issued, and

(b) immediately after the stock was issued.

Gross assets include those of any

predecessor of the corporation. All

corporations that are members of the same

parent-subsidiary controlled group are treated

as one corporation.

If the partnership chooses to postpone

gain, report the entire gain realized on the

sale on line 1 or 6. Directly below the line on

which the partnership reported the gain, enter

in column (a) “Section 1045 Rollover” and

enter as a (loss) in column (f) the amount of

the postponed gain.

Constructive Sale

Treatment for Certain

Appreciated Positions

The partnership is treated as making a

constructive sale of an appreciated position

when it (or a related person, in some cases)

does one of the following:

● Enters into a short sale of the same or

substantially identical property (that is, a

“short sale against the box”).

● Enters into an offsetting notional principal

contract relating to the same or substantially

identical property.

● Enters into a futures or forward contract to

deliver the same or substantially identical

property.

● Acquires the same or substantially identical

property (if the appreciated position is a short

sale, offsetting notional principal contract, or

a futures or forward contract).

● The partnership closed the transaction

before the end of the 30th day after the end

of the year in which it was entered into,

● The partnership held the appreciated

position to which the transaction relates

throughout the 60-day period starting on the

date the transaction was closed, and

● At no time during that 60-day period was

the partnership’s risk of loss reduced by

holding certain other positions.

For details and other exceptions to these

rules, see Pub. 550.

Caution: The partnership also must separately

state the amount of the gain rolled over on

qualified stock under section 1045 on Form

1065, Schedule K, line 7, because each

partner must determine if he or she qualifies

for the rollover at the partner level. Also, the

partnership must separately state on that line

(and not on Schedule D) any gain that would

qualify for the section 1045 rollover at the

partner level instead of the partnership level

(because a partner was entitled to purchase

replacement stock) and any gain on qualified

stock that could qualify for the 50% exclusion

under section 1202.

● A sale or other disposition of an interest in

a partnership owning unrealized receivables

or inventory items may result in ordinary gain

or loss. See Pub. 541, Partnerships, for more

details.

● Certain constructive ownership

transactions. Gain in excess of the gain that

would have been recognized if the

partnership had held a financial asset directly

during the term of a derivative contract must

be treated as ordinary income. See section

1260 for details.

Generally, the partnership must recognize

gain (but not loss) on the date it enters into a

constructive sale of any appreciated position

in stock, a partnership interest, or certain

debt instruments as if the position were

disposed of at fair market value on that date.

Exception. Generally, constructive sale

treatment does not apply if:

Special Rules for Traders in

Securities

Traders in securities are engaged in the

business of buying and selling securities for

their own account. To be engaged in

business as a trader in securities:

● The partnership must seek to profit from

daily market movements in the prices of

securities and not from dividends, interest, or

capital appreciation.

● The partnership’s trading activity must be

substantial.

● The partnership must carry on the activity

with continuity and regularity.

The following facts and circumstances should

be considered in determining if a

partnership’s activity is a business:

● Typical holding periods for securities

bought and sold.

● The frequency and dollar amount of the

partnership’s trades during the year.

● The extent to which the partners pursue

the activity to produce income for a

livelihood.

● The amount of time devoted to the activity.

The limitation on investment interest

expense that applies to investors does not

apply to interest paid or incurred in a trading

business. A trader reports interest expense

and other expenses (excluding commissions

and other costs of acquiring or disposing of

securities) from a trading business on page 1

of Form 1065.

A trader also may hold securities for

investment. The rules for investors generally

will apply to those securities. Allocate interest

and other expenses between the

partnership’s trading business and its

investment securities. Investment interest

expense is reported on line 14a of Schedules

K and K-1.

If the partnership filed its original return on

time without making the election, it may make

the election on an amended return filed no

later than 6 months after the due date of the

return (excluding extensions). Write “Filed

pursuant to section 301.9100-2” at the top of

the amended return.

Like an investor, a trader must report each

sale of securities (taking into account

commissions and any other costs of acquiring

or disposing of the securities) on Schedule D

or on an attached statement containing all

the same information for each sale in a similar

format. However, if a trader made the

mark-to-market election (see page 5 of the

Instructions for Form 1065), each transaction

is reported in Part II of Form 4797 instead of

Schedule D. Regardless of whether a trader

reports its gains and losses on Schedule D or

Form 4797, the gain or loss from the

disposition of securities is not taken into

account when figuring net earnings from

self-employment on Schedules K and K-1.

See section 1402(i) for an exception that

applies to section 1256 contracts.

● The partnership must have acquired the

stock at its original issue (either directly or

through an underwriter), either in exchange

for money or other property or as pay for

services (other than as an underwriter) to the

corporation. In certain cases, the partnership

may meet the test if it acquired the stock

from another person who met this test (such

as by gift or at death) or through a conversion

or exchange of qualified business stock by

the holder.

● During substantially all the time the

partnership held the stock:

1. The corporation was a C corporation,

2. At least 80% of the value of the

corporation’s assets were used in the active

conduct of one or more qualified businesses

(defined below), and

3. The corporation was not a foreign

corporation, domestic international sales

corporation (DISC), former DISC, corporation

that has made (or that has a subsidiary that

has made) a section 936 election, regulated

investment company (RIC), real estate

investment trust (REIT), real estate mortgage

investment conduit (REMIC), financial asset

securitization investment trust (FASIT), or

cooperative.

Rollover of Gain From Qualified

Stock

If the partnership sold qualified small

business stock (defined below) it held for

more than 6 months, it may postpone gain if

it purchased other qualified small business

stock during the 60-day period that began on

the date of the sale. The partnership must

recognize gain to the extent the sale

proceeds exceed the cost of the replacement

stock. Reduce the basis of the replacement

stock by any postponed gain.

Note: A specialized small business investment

company (SSBIC) is treated as having met

test 2 above.
Schedule D (Form 1065) 2002 Page 4

See section 852(f) for the treatment of

certain load charges incurred in acquiring

stock in a mutual fund with a reinvestment

right.

If the gross sales price is reported in

column (d), increase the cost or other basis

by any expense of sale, such as broker’s

fees, commissions, or option premiums,

before making an entry in column (e).

For more details, see Pub. 551, Basis of

Assets.

Lines 4 and 9—Capital Gains

and Losses From Other

Partnerships, Estates, and

Trusts

Line 10—Capital Gain

Distributions

See the Schedule K-1 or other information

supplied to you by the other partnership,

estate, or trust.

On line 10, column (f), report the total

amount of (a) capital gain distributions and

(b) the partnership’s share of undistributed

capital gains from a RIC or REIT. On line 10,

column (g), report the 28% rate gain portion

of these amounts. Report the partnership’s

share of taxes paid on undistributed capital

gains by a RIC or REIT on a statement

attached to Form 1065 for Schedule K, line

24 (and each partner’s share in the line 25

Supplemental Information space of

Schedule K-1).

Column (f)—Gain or (Loss)

Make a separate entry in this column for each

transaction reported on lines 1 and 6 and any

other line(s) that applies to the partnership.

For lines 1 and 6, subtract the amount in

column (e) from the amount in column (d).

Enter negative amounts in parentheses.

Column (g)—28% Rate Gain or

(Loss)

Enter in column (g) only the amount, if any,

from Part II, column (f), that is from

collectibles gains and losses. A collectibles

gain or loss is any long-term gain or

deductible long-term loss from the sale or

exchange of a collectible that is a capital

asset.

Collectibles include works of art, rugs,

antiques, metals (such as gold, silver, and

platinum bullion), gems, stamps, coins,

alcoholic beverages, and certain other

tangible property.

Column (e)—Cost or Other

Basis

If the partnership sold stock, adjust the

basis by subtracting all the stock-related

nontaxable distributions received before the

sale. This includes nontaxable distributions

from utility company stock and mutual funds.

Also adjust the basis for any stock splits or

stock dividends.

If a charitable contribution deduction is

passed through to a partner because of a

bargain sale of property to a charitable

organization, the adjusted basis for

determining gain from the sale is an amount

that has the same ratio to the adjusted basis

as the amount realized has to the fair market

value.

In general, the cost or other basis is the cost

of the property plus purchase commissions

and improvements and minus depreciation,

amortization, and depletion. If the partnership

got the property in a tax-free exchange,

involuntary conversion, or wash sale of stock,

it may not be able to use the actual cash cost

as the basis. If the partnership does not use

cash cost, attach an explanation of the basis.

Enter in this column either the gross sales

price or the net sales price from the sale. On

sales of stocks and bonds, report the gross

amount as reported to the partnership by the

partnership’s broker on Form 1099-B,

Proceeds From Broker and Barter Exchange

Transactions, or similar statement. However,

if the broker advised the partnership that

gross proceeds (gross sales price) less

commissions and option premiums were

reported to the IRS, enter that net amount in

column (d).

Specific Instructions

Columns (b) and (c)—Date

Acquired and Date Sold

Use the trade dates for date acquired and

date sold for stocks and bonds traded on an

exchange or over-the-counter market. The

acquisition date for an asset the partnership

held on January 1, 2001, for which it made

an election to recognize any gain on a

deemed sale, is the date of the deemed sale.

A qualified business is any business other

than the following:

● One involving services performed in the

fields of health, law, engineering, architecture,

accounting, actuarial science, performing arts,

consulting, athletics, financial services, or

brokerage services.

● One whose principal asset is the reputation

or skill of one or more employees.

● Any banking, insurance, financing, leasing,

investing, or similar business.

● Any farming business (including the raising

or harvesting of trees).

● Any business involving the production of

products for which percentage depletion can

be claimed.

● Any business of operating a hotel, motel,

restaurant, or similar business.

Also include gain (but not loss) from the

sale or exchange of an interest in a

partnership or trust held for more than 1 year

and attributable to unrealized appreciation of

collectibles. For details, see Regulations

section 1.1(h)-1. Also attach the statement

required under Regulations section 1.1(h)-1(e).

Column (d)—Sales Price

If the partnership elected to recognize gain

on an asset held on January 1, 2001, its

basis in the asset is its closing market price

or fair market value, whichever applies, on the

date of the deemed sale, whether the

deemed sale resulted in a gain or an

unallowed loss.

Rollover of gain from empowerment

zone assets. If the partnership sold a

qualified empowerment zone asset it held for

more than one year, it may be able to elect to

postpone part or all of the gain. For details,

see Pub. 954, Tax Incentives for

Empowerment Zones and Other Distressed

Communities, and section 1397B.