SCHEDULE D
(Form 1120)

Department of the Treasury
Internal Revenue Service

To be filed with Forms 1120, 1120-
1120L, 1120-PC, 1120-POL, 1120-REI

Capital Gains and Losses

, 1120-IC-DISC, 1120F, 1120-FSC, 1120-H,
 1120-RIC, 990-C, and certain Forms 990-T

OMB No. 1545-0123

1987

Name

Employer identification number

| Part || Short-term Capital Gains and Losses—Assets Held Six Months or Less
(One year or less if acquired after 12/31/87)

(a) Kind of property and description
(Example, 100 shares of "2" Co.)

(b) Date acquired
(mo., day, yr.)

(c) Date sold

(mo., day. yr) (d) Gross sales price

(@) Cost or other basis,
plus expense of sale

(f) Gain or loss
((d) less (e))

2 Short-term capital gain from installment sales from Form 6252, line 23 or 31
3 Unused capital loss carryover (attach computation)

4 Net short-term capital gain or (loss)

alo

ilaaig Long-term Capital Gains and Losses Assets Held More Than nS Months
(More than one year if acquired after 12/31/87)

5

6 Enter gain from Form 4797, line 7 or 9 . 6
7 Long-term capital gain from installment sales from Form 6252, line 23 or 31. 7
8 _ Net long-term capital gain or (loss) een 8
izlaalig Summary of Parts | and It
9 Enter excess of net short-term capital gain (line 4) over net long-term capital loss (line 8) . . 9
10 Net capital gain. Enter excess of net long-term capital gain (line 8) over net short-term capital loss dine 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.
iZlaai_@ Alternative Tax Computation (If your tax year begins after June 30, 1987, do not complete Part IV. Forms

1120-H, 1120-IC-DISC, and 1120-RIC filers also omit Part IV.)

a Form 1120—Enter the amount from line 34, Schedule B,
Tax Computation Worksheet, in the instructions for Forms

12 Partial tax.

1120 and 1120-A.

b  Others—See the tax computation instructions for applicable

return

13 Enter 34% of line 10 (Form 1120-REIT filers, see instructions)

14 Alternative tax—total of lines 12 and 13. 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

Instructions

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

New Law Changes.—The alternative tax has
been repealed for tax years beginning after June
30, 1987. See Parts Ill and IV below for more
information about alternative tax.

The Tax Reform Act of 1986 changed some of
the rules governing corporate distributions.
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. Certain
exceptions to the gain recognition rule that were
contained in section 311 have been repealed.
See section 311 for more information. For
liquidations completed after 1986, gain or loss is

generally 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.

Purpose of Form

This Schedule D should be used by a taxpayer
whose tax year begins in 1987 and who files
either Forms 1120, 1120-A, 1120-IC-DISC,
1120F, 1120-FSC, 1120-H, 1120L, 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
ina 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

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

Schedule D (Form 1120) 1987


‘Schedule D (Form 1120) 1987

Page 2

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.

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 6 months or less. In Part Il, report the
sale or exchange of capital assets held more than
6 months. For property acquired after December
31, 1987, the holding period has been changed
to 1 year.

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. AU.S. Government publication (including
the Congressional Record) received from
the Government or any of its agencies ina
manner other than by buying it at the price
offered for public sale, which is held bya
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. —
For tax years beginning after 1986, 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 8582,
Passive Activity Loss Limitations, before
completing Schedule D.

A capital gain on the sale or exchange of an
entire interest in a passive activity in a fully
taxable disposition to an unrelated party is
reported on Schedule D. The gain (reduced by
any current year operating loss from that activity)
is also included on Form 8582 if the corporation
has other passive activity losses.

Capital losses from a fully taxable disposition
ofan entire interest in a passive activity to an
unrelated party are allowed in full under the
passive activity loss rules, but may be subject to
the capital loss limitations. Enter the loss on
Schedule D, but do not enter it on Form 8582.

Capital gains and losses from a disposition of
less than an entire interest in a passive activity are
treated the same as any other passive activity gain
or loss. The gain is entered on Schedule D and also
on Form 8582 as passive activity income if the
corporation has other passive activity losses. The
loss is not entered on Schedule D until the passive
activity loss allowed is figured on Form 8582.

Report the allowed losses computed on
worksheet 5 of the Form 8582 instructions as
separate short-term or long-term losses in
column (f) of Schedule D. Include in the
description for column (a) “Loss from Form
8582.” Complete any remaining columns
according to the column headings.

@ 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, Computation of 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.

For tax years beginning after 1986, 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 toa 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 1120 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 by a bank.)
@ Nonrecognition of gain on sale of stock to an
SOP.—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, 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. Anet
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. The at-risk rules now
apply to the holding of real property placed in
service after 1986.

Part II|—Summary of Parts | and Il
Ifthe net long-term capital gain is more than the
net short-term capital loss, there is a net capital
gain. If the corporation's tax year begins before
July 1, 1987, and there is a net capital gain, 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

Form 1120L and Form 1120-REIT filers should
see the instructions for those forms before
figuring 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).

Certain dairy farmers see section 406 of the
Tax Reform Act of 1986,

If the alternative tax amount on line 14 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.