SCHEDULE D
(Form 1120)

Department of the Treasury
Internal Revenue Service

Capital Gains and Losses

To be filed with Forms 1120, 1120-A, 1120-DF, 1120-IC-DISC, 1120F,
1120-FSC, 1120-H, 1120L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT,
1120-RIC, 990-C, and certain Forms 990-T

OMB No. 1545-0123

1988

Name

Employer identification number

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

(Six months or less if acquired before 1/1/88)

Kind of rty and di Iti (b) Date d Date sold Cost or other basis, (f) Gain (or loss)
“Ramp Tobshaesor z Go) One day) (now dsy.yr) | ®Grosssalesprice | Gcostereimereais | Ganiorss
1
2 Short-term capita! gain from installment sales from Form 6252, line 22 or 30 | 2 |
3 Unused capital loss carryover (attach computation) . Coe ee 3 |
4 __Net short-term capital gain or (loss) _. 4

P.

Uj Long-Term Capital Gains and Losses—Assets Held More Than One Year
(More than six months if acquired before 1/1/88)

6 Enter gain from Form 4797, line 7 or9 . rs 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
Summary of Parts | and II

9 Enter excess of net short-term capital gain (line 4) over net long-term capital loss(line8). . . . . . L9®
10 Net capital gain. Enter excess of net long-term capital gain (line 8) over net short-term capital loss (line 4) | 10
11 Total of lines 9 and 10. Enter here and on Form 1120, line 8, page 1; or the proper line on other returns | 11

Note: If losses exceed gains, see instructions on capital losses for explanation of capital loss carrybacks.

Instructions

(Section references are to the Internal
Revenue Code unless otherwise noted.)

Purpose of Form

This Schedule D should be used by a
taxpayer whose tax year begins in 1988 and
who files either Forms 1120, 1120-A,
1120-DF, 1120-IC-DISC, 1120F, 1120-
FSC, 1120-H, 1120L, 1120-ND, 1120-PC,
1120-POL, 1120-REIT, 1120-RIC, 990-C,
or certain Forms 990-T, 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, Sales of Business
Property. 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.

Parts | and II

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 |, report the sale or exchange of
capital assets held one year or less. In Part
Il, report the sale or exchange of capital
assets held more than one year. For
property acquired before January 1, 1988,
the holding period is 6 months.

What Are Capital Assets?—Each item of

property the corporation held (whether or

hot 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.

For Paperwork Reduction Act Notice, see page 1 of the Instructions for Forms 1120 and 1120-A.

Schedule D (Form 1120) 1988


‘Schedule D (Form 1120) 1988

Page 2

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. AU.S. 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 is recognized when
business or investment property is
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, or other securities or evidences of
indebtedness. Generally, it does not include
exchanges of partnership interests. See
section 1031.)

If Schedule D is 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 from passive
activities. —A closely held or personal
service corporation that has a gain or loss
which relates to a passive activity (section
469) may be required to complete Form
8810, Corporate Passive Activity Loss and
Credit Limitations, before completing
Schedule D. See Form 8810 for details.

e Gain on distributions of appreciated
property.—Generally, gain (but not loss) is
recognized on a nonliquidating distribution
of appreciated property to the extent that
the property's fair market value exceeds its
adjusted basis. See section 311 for more
information.

@ Gain or loss on distribution of property
in complete liquidation.—Generally, gain
or loss is recognized by a corporation upon
the liquidating distribution of property as if
it had sold the property at its fair market
value. An exception to this rule applies for
liquidations of certain subsidiaries. See
sections 336 and 337 for more information
and other exceptions to the general rules. In
addition, the special nonrecognition rules
governing 12-month liquidations have been
repealed. However, section 633(d) of the
Tax Reform Act of 1986 provides a
transition rule for certain qualified small
corporations that completely liquidate

before January 1, 1989. These corporations
should get Form 964-A, Computation of
Gain or Loss Recognized by Qualified
Corporations on Complete Liquidation, to
compute their gain or loss before
completing Schedule D.

© Gains and losses on section 1256

contracts and straddles.—Use Form

6781, Gains and Losses From Section

1256 Contracts and Straddles, to report

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 a

corporation has a gain this year from the

sale of real property or a casual sale of

personal property other than inventory and
is to receive any payment in a later year, it
must use the installment method (unless it

elects not to) and file Form 6252,

Installment Sale Income. Also use Form

6252 if a payment is received this year from

a sale made in an earlier year on the

installment basis.

The corporation may elect out of the
installment method by doing the following
ona 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.

The installment method may not be used
for sales of stock or securities (or certain
other property described in the regulations)
traded on an established securities market.
See section 453(k).

@ 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 1120L 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 capital

assets of an insurance company taxable

under section 831.—Under the provisions

of section 834(c)(6), the capital losses of a

property and casualty insurance company
are deductible to the extent that the assets
were sold to meet abnormal insurance losses
or to provide for the payment of dividend and
similar distributions to policyholders.

@ 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 bya
bank.)

@ 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.

e Capital gain distributions. — Report
capital gain distributions paid by mutual
funds as long-term capital gains on line 5
regardless of how long the corporation
owned stock in the fund.

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, certain asset acquisitions, or
wash sale of stock, see sections 301 (or
1059), 334, 362 (or 358), 1014, 1015,
372 (or 374), 1031, 1033, 1060, 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 to a 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. A net 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.