Instructions for Form 1120S Schedule D |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
In Part I, report the sale, exchange, or distribution of capital assets held 1 year or less. In Part II, report the sale,
exchange, or distribution
of capital assets held more than 1 year. Use the trade dates for the dates of acquisition and sale of stocks and bonds traded
on an exchange or
over-the-counter market.
Column (b). Date Acquired
The acquisition date for an asset the corporation held on January 1, 2001, for which it made an election to recognize any
gain on a deemed sale, is
the date of the deemed sale and reacquisition.
Column (e). Cost or Other Basis
In general, the basis of property is its cost. See section 1012 and the related regulations. Special rules may apply to the
receipt of certain
distributions with respect to stock (section 301), liquidation of another corporation (334), transfer to another corporation
(358), transfer from a
shareholder or reorganization (362), bequest (1014), contribution or gift (1015), tax-free exchange (1031), involuntary conversion
(1033), certain
asset acquisitions (1060), or wash sale of stock (1091). Attach an explanation if the corporation uses a basis other than
actual cost of the property.
See Pub. 551, Basis of Assets, for more details.
Before making an entry in column (e), increase the cost or other basis by any expense of sale, such as broker's fees, commissions,
state and local
transfer taxes, and option premiums, unless the net sales price was reported in column (d).
If the corporation 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.
If the corporation elected to recognize gain on an asset held on January 1, 2001, its basis in the asset is its closing market
price or fair market
value, whichever applies, on the date of the deemed sale and reacquisition, whether the deemed sale resulted in a gain or
unallowed loss.
See section 852(f) for the treatment of certain load charges incurred in acquiring stock in a mutual fund with a reinvestment
right.
Column (f). Gain or (Loss)
Make a separate entry in this column for each transaction reported on lines 1 and 7 and any other line(s) that apply to the
corporation. For lines
1 and 7, subtract the amount in column (e) from the amount in column (d). Enter negative amounts in parentheses.
Part III. Built-In Gains Tax
Section 1374 provides for a tax on built-in gains, without regard to when S corporation status was elected, if the corporation
sold or exchanged an
asset acquired from a C corporation with a basis determined by reference to its basis (or the basis of any other property)
in the hands of a C
corporation.
Line 14.
Enter the amount that would be the taxable income of the corporation for the tax year if only recognized built-in
gains (including any carryover of
gain under section 1374(d)(2)(B)) and recognized built-in losses were taken into account.
Section 1374(d)(3) defines a recognized built-in gain as any gain recognized during the recognition period (the 10-year
period beginning on the
first day of the first tax year for which the corporation is an S corporation, or beginning the date the asset was acquired
by the S corporation, for
an asset with a basis determined by reference to its basis (or the basis of any other property) in the hands of a C corporation)
on the sale or
distribution (disposition) of any asset, except to the extent the corporation establishes that:
-
The asset was not held by the corporation as of the beginning of the first tax year the corporation was an S corporation (except
this does
not apply to an asset acquired by the S corporation with a basis determined by reference to its basis (or the basis of any
other property) in the
hands of a C corporation), or
-
The gain exceeds the excess of the fair market value of the asset as of the start of the first tax year (or as of the date
the asset was
acquired by the S corporation, for an asset with a basis determined by reference to its basis (or the basis of any other property)
in the hands of a C
corporation) over the adjusted basis of the asset at that time.
Certain transactions involving the disposal of timber, coal, or domestic iron ore under section 631 are not subject
to the built-in gains tax. See
Rev. Rul. 2001-50, 2001-43 I.R.B. 343.
Section 1374(d)(4) defines a recognized built-in loss as any loss recognized during the recognition period (defined
above) on the disposition of
any asset to the extent the corporation establishes that:
-
The asset was held by the corporation as of the beginning of the first tax year the corporation was an S corporation (except
that this does
not apply to an asset acquired by the S corporation with a basis determined by reference to its basis (or the basis of any
other property) in the
hands of a C corporation), and
-
The loss does not exceed the excess of the adjusted basis of the asset as of the beginning of the first tax year (or as of
the date the
asset was acquired by the S corporation, for an asset with a basis determined by reference to its basis (or the basis of any
other property) in the
hands of a C corporation), over the fair market value of the asset as of that time.
The corporation must show on an attachment its total net recognized built-in gain and list separately any capital
gain or loss and ordinary gain or
loss.
Line 15.
Figure taxable income by completing lines 1 through 28 of Form 1120. Follow the instructions for Form 1120. Enter
the amount from line 28 of Form
1120 on line 15 of Schedule D. Attach to Schedule D the Form 1120 computation or other worksheet used to figure taxable income.
Note.
Taxable income is defined in section 1375(b)(1)(B) and is generally figured in the same manner as taxable income for line
9 of the Excess Net
Passive Income Tax Worksheet for Line 22a in the Instructions for Form 1120S.
Line 16.
If for any tax year the amount on line 14 exceeds the taxable income on line 15, the excess is treated as a recognized
built-in gain in the
succeeding tax year. This carryover provision applies only in the case of an S corporation that made its election to be an
S corporation after March
30, 1988. See section 1374(d)(2)(B).
Line 17.
Enter the section 1374(b)(2) deduction. Generally, this is any net operating loss carryforward or capital loss carryforward
(to the extent of net
capital gain included in recognized built-in gain for the tax year) arising in tax years for which the corporation was a C
corporation. See section
1374(b)(2) and Regulations section 1.1374-5.
Line 21.
The built-in gains tax is treated as a loss sustained by the corporation during the same tax year. Deduct the tax
attributable to:
-
Ordinary gain as a deduction for taxes on Form 1120S, line 12.
-
Short-term capital gain as short-term capital loss on Schedule D, line 5.
-
Long-term capital gain as long-term capital loss on Schedule D, line 12.
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