SCHEDULE D
(Form 1120) Capital Gains and Losses 1978

Department of the Treasury > Attach to your income tax return.

Employer Identification Number

HEZGAMEM Short-term Capital Gains and Losses—Assets Held ONE YEAR or Less

f. Gain or (loss) 8. Gain or loss
Kind of property and description | b. Date, acquired ¢. Date sold 4, Gross sales pri i the
eoame! {OD"Shares of E"0) | “mossaycge) | don day. yt) | Soaorpenve of aie | % Cost or ether basis | CUTS Bee

2 Unused capital loss carryover (attach computation) . . . - . oo
3 Net short-term capital gain or (loss). - ee

EEZTNIMME Long-term Capital Gains and Losses—Assets Held More Than ONE YEAR

4 Enter section 1231 gain
5

from Form 4797, line 6(a)(1) -

G28 Summary of Schedule D Gains and Losses

7 Enter excess of net short-term capital gain (line 3) over net long-term capital loss (line 6). -

8 Enter excess of net long-term capital gain (line 6) over net short-term capital loss (line 3). .

9 Total of lines 7 and 8. Enter here and on Form 1120, line 9(a), pagel. . . - . + +

GZ Alternative Tax Computation
(Fiscal year corporations, do not complete Schedule D (Form 1120), Part IV but instead comp

10 Taxable income (Form 1120, line 30, pagel) . . - - ee
11. Excess of net long-term capital gain over net short-term capital loss. ee ee ee
12 Subtract line 11 from line 10. 2 6. ee ee ee
13 Enter line 12 or $25,000, whichever is less. (Members of a controlled group enter one-half

of surtax allocation, see instructions)... 6 6 8 ee ee ee ee
14 Subtract line13fromlinel2. 2 6 ee ee ee
15 Enter line 14 or $25,000, whichever is less. (Members of a controlled group enter one-half

of surtax allocation, see instructions). . - - 2 + 2 ee © 8 ee ee ee
16 Subtract line 15 from line 14 2. 6 we ee
17 20% of line 13. 6 we ee
18 22% of line 15. ©. 1 ww we
19 48% of linel16. © 6 we ee ee ee
20 30% oflinell. . . . ee eee
21 Alternative tax—total of lines 17 through 20. it applicable, enter here and on Form 1120,

line 9, Schedule J, and write “ALT.” in the margin to the right of the entry...» +

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Instructions

(References are to the Internal Revenue Code.)

This schedule provides for the reporting of
sales or exchanges of capital assets. Every sale
or exchange of property must be reported even
though no gain or loss is indicated.

See Form 4797 and related instructions for
reporting sales or exchanges of property other
than capital assets including the sale or ex-
change of property used in the trade or business
and involuntary conversions (section 1231);
also, gain from the disposition of interest in oil
or gas property (section 1254).

Parts | and Il

Note: The Tax Reform Act of 1976 in-
creased the holding period for long-term
capital gains and losses to more than one
year for taxable years beginning in 1978
and after.

For amounts received from any install-
ment sale, the holding period rule in
effect in the year of sale will determine the
treatment of the amounts received as long-
term or short-term gain.

Gains and losses on futures transactions
(but not options on futures transactions)
in any commodity subject to the rules of a
board of trade or commodity exchange will
retain the more than 6-month holding
period rule for long-term treatment. See
section 1222,

Instructions for Column g.—Fiscal year tax-
payers will enter in column g that portion of col-
umn f which relates to sales and exchanges after
December 31, 1978.

Capital Assets.—Each item of property held
by a corporation (whether or not connected with
its trade or business) is a capital asset except:
(1) inventoriable assets or property held pri-
marily 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 sim-
ilar property; (4) accounts or notes receivable
acquired in the ordinary course of trade or busi-
ness for services rendered or from the sale of
Property described in (1) above; (5) certain
short-term Federal, State, and municipal obli-
gations; and (6) a publication of the United
States Government (including the Congressional
Record) which is received from the United
States Government or any agency thereof, other
than by purchase at the price at which it is
offered for sale to the public, and which is
held by (a) a taxpayer who so received such
publication, or (b) a taxpayer in whose hands
the basis of such publication is determined, for
Purposes of determining gain from a sale or
exchange, in whole or in part by reference to the
basis of such publication in the hands of a tax-
Payer described in 6(a).

Exchange of “‘Like Kind” Property.—Although
no gain or loss is recognized when property held
for productive use in a trade or business or for
investment is exchanged solely for property of
a “like kind” to be held either for productive
use in a trade or business or for investment,
you must report the transaction on Schedule D
(Form 1120) or Form 4797, whichever is ap-
plicable. This does not include property that is
stock in trade or other property held primarily
for sale, nor stocks, bonds, notes, choses in
action, certificates of trust or beneficial inter-

est, or other securities or evidence of indebt-
edness or interest. If Schedule D is applicable,
identify the property disposed of in column (a).
Enter the date of acquisition in column (b)
and write the date of exchange in column (c).
Write “like kind exchange’ in column (d) and
enter the adjusted basis in column (e). Enter
zero in column (f). (See section 1031.)

Gain from Sale of Depreciable Property Be-
tween Certain Related Taxpayers.—Gain from
the sale or exchange of depreciable property
between related persons is ordinary income if
such property is, in the hands of the transferee,
subject to depreciation. ‘Related persons” in-
cludes: (1) an individual and a corporation 80
percent or more in value of the outstanding stock
of which is owned, directly or indirectly, by or for
such individual; or (2) two or more corporations
80 percent or more in value of the outstanding
stock of each of which is owned, directly or in-
directly, by or for the same individual. In gen-
eral, section 318 shall apply with respect to the
constructive ownership of stock. Item (2) only
applies to sales or exchanges made after Oc-
tober 4, 1976, unless the sale or exchange was
made pursuant to a binding contract entered into
on or before that date. (See section 1239.)

Capital Losses.—Capital losses are allowed
only to the extent of capital gains. A net capital
loss, however, may be carried back three years
and forward five as a short-term capital loss.
The capital loss may be carried back only to the
extent it does not increase or produce a net
operating loss in the taxable year to which it
is being carried. Foreign expropriation capital
losses may not be carried back but may be car-
ried forward ten years instead of five. A net
capital loss for a regulated investment company
may be carried forward eight years instead of
five.

Under the provisions of section 6411, a quick
refund of the tax overpayment created by the
capital loss carryback may be obtained by filing
Form 1139. If a net capital loss carryback cre-
ates an unused investment credit or an unused
work incentive (WIN) credit in a preceding year,
the unused credit may be carried back to the
three preceding years (however, the WIN credit
cannot be carried back to years beginning before
1972), and, under the provisions of section
6411, a quick refund of the tax overpayment
may likewise be obtained by filing Form 1139.

Short Sales of Capital Assets.—For rules re-
lating to certain short sales of stock or other
securities, and transactions in commodity fu-
tures, see section 1233.

Worthless Securities—Except for banks, if
securities which are capital assets become
wholly worthless during the taxable year, the
loss is to be treated as a capital loss as of the
last day of the taxable year.

Losses Not Allowable.—No loss is allowed
for wash sales of stock or securities. (See sec-
tion 1091.) No loss is allowed (distributions in
liquidation excepted) on transactions between
related persons, (See section 267.)

Options to Buy or Sell.—See section 1234 for
rules pertaining to the treatment of gain or loss in
the case of a purchaser or that of a grantor of an
option in the case of stock, securities, or com-
modities granted after September 1, 1976.

Cost or Other Basis, As Adjusted.—In deter-
mining gain or loss, the basis of property will
generally be its cost. If property was acquired
by bequest, gift, tax-free exchange, involuntary
conversion, or wash sale of stock, see sections
1014 (and 1023), 1015, 1031, 1033, and
1091, respectively. Attach an explanation if the
basis used is other than actual cash cost of the
property.

‘Ye US, GOVERNMENT PRINTING OFFICE : 1978—0-263-108

If a charitable contribution deduction is al-
lowed by reason of a sale of property to a char-
itable organization, the adjusted basis for deter-
mining gain from the sale is an amount which
is in the same ratio to the adjusted basis as the
amount realized is to the fair market value.

Insurance Companies.—Companies taxable
under section 831 having losses from capital
assets sold or exchanged to obtain funds to meet
abnormal insurance losses, etc., shall attach a
schedule corresponding to Schedule A-3 of Form
1120M. For companies taxable under section
821, all references to line numbers on Form
1120 are to be considered as references to the
appropriate line on Form 1120M.

Part IV

Alternative Tax Computation.—If you have an
excess of net long-term capital gain over net
short-term capital loss compute the tax using
the alternative method (section 1201) to deter-
mine if the resulting tax is less than the tax
computed using the regular method.

The alternative tax is the sum of (1) a partial
tax computed at the normal tax and surtax rates
on the taxable income decreased by the excess
of net long-term capital gain over net short-term
capital loss, plus (2) 30% of such excess.

In computing the alternative tax, deductions
subject to a limitation based upon taxable in-
come (such as contributions and the special de-
ductions in Schedule 1) do not have to be
recomputed.

Members of a Controlled Group.—For mem-
bers of a controlled group, the $50,000 surtax
exemption is to be divided equally unless the
group consents to split up the exemption in
accordance with an apportionment plan. For
purposes of lines 13 and 15, all members of a
controlled group will enter one-half of their
surtax exemption allocation on line 13 and the
remaining one-half on line 15.

When an apportionment plan is adopted or
later amended, each member of the controlled
group must attach to its tax return a copy of its
consent to this plan. The copy should show or
have attached the amount of the surtax exemp-
tion apportioned to that member, as well as
other data. See section 1561 and regulation
section 1.1561-3(b) for the time and manner
of making the consent.

Minimum Tax on Tax Preference Items.—If
the net long-term capital gain exceeds the net
short-term capital loss, you may be liable for
minimum tax. See Form 4626.

Installment Sales

If you sold personal property for more than
$1,000 or real property regardless of amount,
you may be eligible to report any gain under
the installment method if (1) there are no pay-
ments in the year of sale or (2) the payments in
the year of sale do not exceed 30% of the sell-
ing price. (See section 453.) Such sales must
provide for two or more payments, with at least
one payment being made in each of two taxable
years.

For treatment of a portion of payments as
“unstated interest” on deferred payment sales,
see section 483.

If you elect the installment method, attach
computation. For additional information, get
Publication 537, Tax Information on Installment
and Deferred-Payment Sales.

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