SCHEDULE D Capital Gains and Losses
(Form 1120)

Department of the Treasury 1120-H, 1120L, 1120M, 1120-POL, 990-C, and certain Forms 990-T

Internal Revenue Service

To be filed with Forms 1120, 1120-A, 1120-IC-DISC, 1120F, 1120-FSC,

OMB No. 1545-0123

1986

Name Employer identification number

Short-term Capital Gains and Losses—Assets Held Six Months or Less

(a) Kind of property and descriptior (b) Date acquired (c) Date sold (@) Cost or other basis, f) Gain or loss
Reape, 100 shares of" Go). (ino. day. Yr) (mo., day, yr.) (2) Gross sales price | Oise expense of sale Ugitess (0)

1

2 Short-term capital gain from installment sales from Form 6252, line 22 or 30 2

3 > Unused capital loss carryover (attach computation) | 3 )
4 Netshort-term capital gain or (loss) . 4

izlaaig Long-term Capital Gains and Losses—Assets Held More Than Six Months

5 Enter gain from Form 4797, line 6 or 8. [s
6
7 Long-term capital gain from installment sales from Form 6252, line 22 or 30. 7
8 Net long-term capital gain or (loss) 8
EPYaa11) Summary of Parts | and Il
9 Enter excess of net short-term capital gain (line 4) over net long-term capital loss (line 8) . | 9 |
10a Net capital gain. Enter excess of net long-term capital gain (line 8) over net short-term capital loss (line 4). 10a
b Fiscal year corporations that are using the alternative method to compute tax, enter the net capital gain y TN
forthe period before 1987. . . . . . . wee 10b YY}
11

11 Total of lines 9 and 10a. Enter here and on Form 1120, line 8, page 1; or the proper line on other returns.
Note: If losses exceed gains, see instructions on capital losses for explanation of capital loss carrybacks.

Part IV Alternative Tax Computation for Calendar Year Corporations Only. Fiscal Year Corporations See the
a instructions for Forms 1120 and 1120A. (Forms 1120-H and 1120-IC-DISC Filers Omit Part IV)

b Others—Enter amount from the proper

12 Taxable income. Enter the amount from {
line of other returns

a Form 1120, line 30, page 1 |

13 Net capital gain from line 10a .

14 Subtract line 13 from line 12

. 1120 and 1120-A, Tax Computation
tax online 14s follows & Others—In accordance with the tax computation instructions

15 Partial tax. Compute the { a Form 1120—In accordance with the instructions for Forms }
for applicable return

16 Enter 28% of line 13 .

17 Alternative tax—total of lines 15 and 16, if less than amount of tax figured by regular method, enter here

and on Form 1120, Schedule J, line 3; or the proper line on other returns. Also check box for Schedule D.

12

13

14

15

16

17

For Paperwork Reduction Act Notice, see page 1 of the Instructions for Forms 1120 and 1120-A. Schedule D (Form 1120) 1986


‘Schedule D (Form 1120) 1986

Page 2

Instructions

(Section references are to the Internal Revenue
Code.)

Purpose of Form

Schedule D should be used by a taxpayer who
files either Forms 1120, 1120-A, 1120-IC-DISC,
1120F, 1120-FSC, 1120-H, 11201, 1120M,
1120-POL, 990-C, or certain Forms 990-7, to
report sales or exchanges of capital assets. Sales
or exchanges of property other than capital
assets, including property used in a trade or
business, involuntary conversions (other than
casualties or thefts), gain from the disposition of
interest in oil, gas, or geothermal property, and
the section 291 adjustment to section 1250
gains should be reported on Form 4797, Gains
and Losses From Sales or Exchanges of Assets
Used in a Trade or Business and Involuntary
Conversions. See the instructions for Form 4797
for more information

If property is involuntarily converted because
of a casualty or theft, use Form 4684, Casualties
and Thefts

Alternative Method of Computing Tax
Repealed

The alternative tax has been repealed for tax
years beginning after 1986. Certain transitional
rules apply to tax years that begin in 1986 and
end in 1987, For more information, including the
computation that fiscal year corporations should
use, see the instructions for Form 1120, or other
applicable form.

Parts | and Il

Generally, a corporation should report sales and
exchanges, including "‘like-kind’” exchanges,
even though there is no gain or loss. No loss is
allowed for a wash sale of stock or securities or
from a transaction between related persons.
(Sections 1091 and 267.)

In Part I, report the sale or exchange of
capital assets held 6 months or less. In Part Il,
report the sale or exchange of capital assets held
more than 6 months.

What are Capital Assets. —Each item of
property the corporation held (whether or not
connected with its trade or business) is a capital
asset except

1. Assets that can be inventoried or property
held mainly for sale to customers.

2. Depreciable or real property used in the
trade or business

3. Certain copyrights; literary, musical, or
artistic compositions; letters or
memorandums; or similar property.

4. Accounts or notes receivable acquired in
the ordinary course of trade or business
for services rendered or from the sale of
property described in 1. above.

5. AUS. Government publication (including
the Congressional Record), received from
the Government or any of its agencies in a
manner other than by buying it at the price
offered for public sale, which is held by a
taxpayer who received the publication or
by a second taxpayer in whose hands the
basis of the publication is determined, for
purposes of determining gain from a sale
or exchange, by referring to its basis in the
hands of the first taxpayer.

Exchange of “like-kind” property.—Report the
exchange of “like-kind”” property on Schedule D
or on Form 4797, whichever applies. The
corporation must report it even though no gain or
loss 1s recognized when business or investment
property 1s exchanged for property of “‘like-
kind.” (This does not include stock in trade or
other property held primarily for sale. It also does
not include stocks, bonds, notes, choses in
action, certificates of trust or beneficial interest,
other securities or evidences of indebtedness or

interest, or transfers made generally after March
31, 1984, for interests in a partnership.)

If Schedule D 1s used, identify in column (a)
the property disposed of. Enter the date it was
acquired in column (b), and the date it was
exchanged in column (c). Write ‘‘like-kind
exchange" in column (d). Enter the cost or other
basis in column (e). Enter zero in column (f).

Special Rules for the Treatment
of Certain Gains and Losses

Note: For more information, get Publication
544, Sales and Other Dispositions of Assets, and
Publication 542, Tax Information on
Corporations

© Gains and losses on section 1256
contracts and straddles.—Use Form 6781,
Gains and Losses From Section 1256 Contracts
and Straddles, to repert gains and losses from
section 1256 contracts and straddles.

@ Gain or loss on certain short-term Federal,
state, and municipal obligations.—Such
obligations are treated as capital assets in
determining gain or loss. On any gain realized, a
portion is treated as ordinary income and the
balance is considered as a short-term capital
gain. See section 1271.

© Gain from installment sales. —If property is
sold at a gain this year and the corporation is to
receive any payment in a later tax year, it must
use the installment method and file Form 6252,
Computation of Installment Sale Income. Also
use Form 6252 if a payment is received in 1985
from a sale made in an earlier year on the
installment basis.

However, the corporation may elect out of
the installment method by doing the following on
a timely filed return (including extensions):

1. Report the full amount of the sale on
Schedule D.

2. If the corporation received a note or other
obligation and is reporting it at less than
face value (including all contingent
obligations), state that fact in the margin
and give the percentage of valuation

© Gain or loss on an option to buy or sell
property.—See sections 1032 and 1234 for the
rules that apply to a purchaser or grantor of an
option.

© Gain or loss from a short sale of
property.—Report the gain or loss to the extent
that the property used to close the short sale is
considered a capital asset in the hands of the
taxpayer.

© Gains and losses of foreign corporations
from the disposition of investment in United
States real property.—Foreign corporations are
required to report gains and losses from the
disposition of U.S. real property interests. See
section 897 for details.

© Gains on certain insurance property.—
Form 11201 filers with gains on property held on
December 31, 1958, and certain substituted
property acquired after 1958 should see section
818(c)

@ Loss from the sale or exchange of an
insurance company's capital assets.—Report
the loss if the assets were sold or exchanged to
get funds to meet abnormal insurance losses. If
an insurance company Is taxed under section
831 and is reporting a loss on Schedule D, also
attach a schedule similar to Schedule C of Form
1120M. If an insurance company is taxed under
section 821, all references to line numbers on
Form 1120 are to be considered as references to
the appropriate line on Form 1120M.

© Loss from securities that are capital assets
that become worthless during the year.—
Except for securities held by a bank, treat the
loss as a capital loss as of the last day of the tax
year. (See section 582 for the rules on the
treatment of securities held by a bank.)

US. Government Printing Office: 1986—493-179 23-0916750,

© Nonrecognition of gain on sale of stock to
an ESOP.—See section 1042 for rules under
which a taxpayer may elect not to recognize gain
from the sale of certain stock to an employee
stock ownership plan (ESOP).

© Disposition of market discount bonds. —
See section 1276 for rules on the disposition of
any market discount bonds that were issued
after July 18, 1984

How To Determine the Cost
or Other Basis of the Property

In determining gain or loss, the basis of property
will generally be its cost (section 1012). The
exceptions to the general rule are provided in
sections contained in subchapters C, K, O, and P
of the Code. For example, if the corporation
acquired the property by dividend, liquidation of
a corporation, transfer from a shareholder,
reorganization, contribution or gift, bequest.
bankruptcy, tax-free exchange, involuntary
conversion, or wash sale of stock, see sections
301 (or 1059), 334, 362 (or 358), 1015, 1014,
372 (or 374), 1031, 1033, and 1091,
respectively. Attach an explanation if the
corporation uses a basis other than actual cash
cost of the property.

If the corporation is allowed a charitable
contribution deduction because it sold property
toa charitable organization, figure the adjusted
basis for determining gain from the sale by
dividing the amount realized by the fair market
value and multiplying that result by the adjusted
basis

Capital Losses.—The amount of capital losses
allowed may not be more than capital gains. A
net capital loss may be carried back 3 years and
forward 5 years as a short-term capital loss.
Carry back a capital loss to the extent it does not
increase or produce a net operating loss in the
tax year to which it is carried. Foreign
expropriation capital losses may not be carried
back, but may be carried forward 10 years
instead of 5. Annet capital loss for a regulated
investment company may be carried forward 8
years instead of 5

At-risk limitations (section 465).—If the
corporation sold or exchanged an asset used in
an activity to which the at-risk rules apply,
combine the gain or loss on the sale or exchange
with the profit or loss from the activity. If the
result is a net loss from the activity, it may be
subject to the at-risk rules.

Part III—Summary of Parts | and II

If the net long-term capital gain is more than the
net short-term capital loss, there is a net capital
gain. In that case, the corporation may want to
complete Part IV to determine if the resulting
alternative tax is less than the tax figured using
the regular method

Part IV—Alternative Tax
Computation

@ Forms 1120-H and 1120-IC-DISC filers omit

Part IV

@ Form 1120L filers should see Form 1120L

instructions before figuring the alternative tax

In figuring the alternative tax, do not refigure
deductions limited by the amount of taxable
income (such as contributions and the special
deductions in Schedule C of Form 1120).

If the alternative tax amount on line 17 is less
than the tax figured by the regular method, enter
the amount of alternative tax on Form 1120,
Schedule J, line 3; or the proper line on other
returns. Also check the box for Schedule D.

If there is a net capital gain, the corporation
may be liable for minimum tax. See Form 4626,
Computation of Minimum Tax—Corporations,
for more information.