Comprehensive Example

Emily Jones is single and, in addition to wages from her job, she has income from stocks and other securities. For the 2000 tax year, she had the following capital gains and losses, which she reports on Schedule D. All the Forms 1099 she received showed net sales prices. Her filled-in Schedule D is shown in this chapter.

Capital gains and losses--Schedule D. Emily sold stock in two different companies that she held for less than a year. In June, she sold 100 shares of Trucking Co. stock that she had bought in February. She had an adjusted basis of $650 in the stock and sold it for $900, for a gain of $250. In July, she sold 25 shares of Computer Co. stock that she bought in June. She had an adjusted basis in the stock of $2,500 and she sold it for $2,000, for a loss of $500. She reports these short-term transactions on line 1 in Part I of Schedule D.

Emily had three other stock sales that she reports as long-term transactions on line 8 in Part II of Schedule D. In February, she sold 60 shares of Car Co. for $2,100. She had inherited the Car Co. stock from her father. Its fair market value at the time of his death was $2,500, which became her basis. Her loss on the sale is $400. Because she had inherited the stock, her loss is a long-term loss, regardless of how long she and her father actually held the stock. She enters the loss in column (f) of line 8.

In June, she sold 500 shares of Furniture Co. stock for $14,000. She had bought 100 of those shares in 1989, for $1,000. She had bought 100 more shares in 1991 for $2,200, and an additional 300 shares in 1993 for $1,500. Her total basis in the stock is $4,700. She has a $9,300 ($14,000 − $4,700) gain on this sale, which she enters in column (f) of line 8.

In December, she sold 20 shares of Toy Co. for $4,100. This was qualified small business stock that she had bought in September 1995. Her basis is $1,100, so she has a $3,000 gain which she enters in column (f) of line 8. Because she held the stock more than 5 years, she has a $1,500 section 1202 exclusion. She enters that amount in column (g) as a 28% rate gain and claims the exclusion on the line below by entering $1,500 as a loss in column (f).

She received a Form 1099-B (not shown) from her broker for each of these transactions.

Capital loss carryover from 1999. Emily has a capital loss carryover to 2000 of $800, of which $300 is short-term capital loss, and $500 is long-term capital loss. She enters these amounts on lines 6 and 14 of Schedule D.

She kept the completed Capital Loss Carryover Worksheet in her 1999 Schedule D instructions (not shown), so she could properly report her loss carryover for the 2000 tax year without refiguring it.

Tax computation (Part IV). Because Emily has gains on both lines 16 and 17 of Schedule D and has taxable income, she uses Part IV of Schedule D to figure her tax. She had already filled out her Form 1040 through line 39 and enters the amount from that line, $30,000, on line 19 of Schedule D. After filling out the rest of Part IV, she finds that her tax is $4,434. This is less than the tax she would have found using the Tax Table, $4,995.

Reconciliation of Forms 1099-B. Emily makes sure that the total of the amounts reported in column (d) of lines 3 and 10 of Schedule D is not less than the total of the amounts shown on the Forms 1099-B she received from her broker. For 2000, the total of each is $23,100. Schedule D, page 1 Schedule D, page 2

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