SCHEDULE D Capital Gains and Losses OMB No. 1545-0123

(Form 1120) To be filed with Forms 1120, 1120-A, 1120-IC-DISC, 1120-F,

1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL,

1120-REIT, 1120-RIC, 1120-SF, 990-C, and certain Forms 990-T Department of the Treasury

Internal Revenue Service

Name Employer identification number

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

(f) Gain or (loss)

((d) less (e))

(e) Cost or other

basis (see

instructions)

(c) Date sold

(mo., day, yr.)

(b) Date acquired

(mo., day, yr.)

(a) Kind of property and

description (Example, 100 shares

of Z Co.)

(d) Sales price

(see instructions)

1

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

( )

3

Unused capital loss carryover (attach computation)

3

4

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

4

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

5

7 Enter gain from Form 4797, line 7 or 9 7

8 Long-term capital gain from installment sales from Form 6252, line 26 or 37 8

10 Net long-term capital gain or (loss). Combine lines 6 through 9

9

Summary of Parts I and II

11 Enter excess of net short-term capital gain (line 5) over net long-term capital loss (line 10) 11

12

Net capital gain. Enter excess of net long-term capital gain (line 10) over net short-term capital

loss (line 5)

12

13 Add lines 11 and 12. Enter here and on Form 1120, page 1, line 8, or the proper line on other returns 13

If property is involuntarily converted

because of a casualty or theft, use Form

4684, Casualties and Thefts.

Purpose of Schedule

Instructions

Use Schedule D to report sales and

exchanges of capital assets and gains on

distributions to shareholders of appreciated

capital assets.

Section references are to the Internal

Revenue Code unless otherwise noted.

Report sales, exchanges, and distributions

of property other than capital assets on Form

4797, Sales of Business Property. Include on

Form 4797 a sale, exchange, or distribution of

property used in a trade or business;

involuntary conversions (from other than

casualties or thefts); gain from the disposition

of oil, gas, or geothermal property; and the

section 291 adjustment to section 1250

gains. See the instructions for Form 4797 for

more details.

For Paperwork Reduction Act Notice, see page 1 of the Instructions for Forms 1120 and 1120-A. Cat. No. 11460M Schedule D (Form 1120) 1997

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

5

6

9 Long-term gain or (loss) from like-kind exchanges from Form 8824

10

Part I

Part II

Part III

Note: If losses exceed gains, see Capital losses in the instructions below.

Parts I and II

Generally, a corporation must report sales

and exchanges even if there is no gain or

loss. Use Part I to report the sale, exchange,

or distribution of capital assets held one year

or less. Use Part II to report the sale,

exchange, or distribution of capital assets

held more than one year. Use the trade dates

for the dates of acquisition and sale of stocks

and bonds on an exchange or

over-the-counter market.

What is a capital asset?—Each item of

property the corporation held (whether or not

connected with its trade or business) is a

capital asset except:

1. Assets properly included in inventory 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 memoranda;

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. U.S. Government publications, including

the Congressional Record, that the

corporation received from the Government,

other than by purchase at the normal sales

price, or that the corporation got from

another taxpayer who had received it in a

similar way, if the corporation’s basis is

determined by reference to the previous

owner’s basis.

97

A Change To Note

Constructive Sales Treatment for Certain

Appreciated Financial Positions.—The

Taxpayer Relief Act of 1997 changed the

treatment of certain appreciated financial

positions. If the corporation holds an

appreciated financial position in stock or

certain other interests, it may have to

recognize gain if it enters into a constructive

sale after June 8, 1997 (such as a “short sale

against the box”). See Pub. 550, Investment

Income and Expenses, for more details.
Schedule D (Form 1120) 1997 Page 2

● Gains on certain insurance property.—

Form 1120-L filers with gains on property

held on December 31, 1958, and certain

substituted property acquired after 1958

should see section 818(c).

● 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 on property distributed in a

complete liquidation. Treat the property as if

it had been sold 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.

● 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), capital losses

of a 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.)

● 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 as a short-term

capital gain. See section 1271.

● Disposition of market discount bonds.—

See section 1276 for rules on the disposition

of market discount bonds.

● Capital gain distributions.—Report capital

gain distributions paid by regulated

investment companies or real estate

investment trusts as long-term capital gains

on line 6 regardless of how long the

corporation owned stock in the fund.

Specific Instructions

Lines 1 and 6, column (e).—In determining

gain or loss, the basis of property will

generally be its cost. See section 1012 and

the related regulations. Exceptions to the

general rule are provided in sections 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, bequest, contribution or gift,

tax-free exchange, involuntary conversion,

certain asset acquisitions, or wash sale of

stock, see sections 301 (or 1059), 334, 362

(or 358), 1014, 1015, 1031, 1033, 1060, and

1091, respectively. Attach an explanation if

the corporation uses a basis other than actual

cash cost of the property.

Special Rules for the

Treatment of Certain Gains

and Losses

Note: For more information, get Pub. 544,

Sales and Other Dispositions of Assets, and

Pub. 542, Corporations.

● At-risk limitations (section 465).—If the

corporation sold or exchanged a capital 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, complete

Form 6198, At-Risk Limitations. Report any

gain from the capital asset on Schedule D

and on Form 6198.

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.

If the corporation is allowed a charitable

contribution deduction because it sold

property in a bargain sale 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.

No loss is allowed in a bargain sale to a

charity. ● 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 from passive

activities.—A closely held or personal service

corporation that has a gain or loss that

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. A

Schedule D loss may be limited under the

passive activity rules. See Form 8810 for

more detailed information.

● Gains and losses of foreign corporations

from the disposition of investment in U.S.

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.

● Gain from installment sales.—If the

corporation has a gain this year from the

casual sale of real or 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—see below)

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 method.

The corporation may elect out of the

installment method by reporting the full

amount of the gain on a timely filed return

(including extensions).

● Gains and losses on section 1256

contracts and straddles.—Use Form 6781,

Gains and Losses From Section 1256

Contracts and Straddles, to report these

gains and losses.

● Like-kind exchanges.—An exchange of

business or investment property for property

of a like kind is reported on Form 8824,

Like-Kind Exchanges.

● Rollover of publicly traded securities

gain into specialized small business

investment companies (SSBICs).—A

corporation that sells publicly traded

securities at a gain may elect under section

1044 to postpone all or part of the gain if the

seller buys stock or a partnership interest in

an SSBIC during the 60-day period that

begins on the date the securities are sold.

An SSBIC is any partnership or corporation

licensed by the Small Business Administration

under section 301(d) of the Small Business

Investment Act of 1958. The corporation must

recognize gain on the sale to the extent the

proceeds from the sale exceed the cost of

the SSBIC stock or partnership interest

purchased during the 60-day period that

began on the date of the sale (and not

previously taken into account). The gain a

corporation may postpone each tax year is

limited to the lesser of (a) $250,000 or

(b) $1 million, reduced by the gain previously

excluded under section 1044. The basis of

the SSBIC stock or partnership interest is

reduced by any postponed gain.

To make the election to postpone gain,

complete line 1 or line 6, whichever applies,

showing the entire gain realized in column (f).

Directly below the line on which the gain is

reported, enter “SSBIC Rollover” in column

(a). Enter the amount of the postponed gain

(in parentheses) in column (f). Also, attach a

schedule showing (a) how you figured the

postponed gain, (b) the name of the SSBIC in

which you purchased common stock or a

partnership interest, (c) the date of that

purchase, and (d) the new basis in that

SSBIC stock or partnership interest.

For more details, see section 1044.

See section 852(f) for the treatment of

certain load charges incurred in acquiring

stock in a mutual fund with a reinvestment

right.

● Loss from a sale or exchange between

the corporation and a related person.—

Except for distributions in complete

liquidation of a corporation, no loss is allowed

from the sale or exchange of property

between the corporation and certain related

persons. See section 267 for details.

● Loss from a wash sale.—The corporation

cannot deduct a loss from a wash sale of

stock or securities (including contracts or

options to acquire or sell stock or securities)

unless the corporation is a dealer in stock or

securities and the loss was sustained in a

transaction made in the ordinary course of

the corporation’s trade or business. A wash

sale occurs if the corporation 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. Lines 1 and 6, column (d).—Enter either the

gross sales price or the net sales price. If the

net sales price is entered, do not increase the

cost or other basis in column (e) by any

expenses reflected in the net sales price.

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

entering an amount in column (e).

Capital losses.—Capital losses are allowed

only to the extent of capital gains. A net

capital loss is 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 cannot be carried

back, but are carried forward 10 years. A net

capital loss for a regulated investment

company is carried forward 8 years.