Instructions for Schedule D (Form 1120S), Capital Gains and Losses and Built-In Gains

• Issuer: Treasury Department
• Section: Treasury Department

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2023

Instructions for Schedule D

(Form 1120-S)

Capital Gains and Losses and Built-in Gains

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue Code unless

otherwise noted.

Future Developments

For the latest information about developments related to

Schedule D (Form 1120-S) and its instructions, such as

legislation enacted after they were published, go to IRS.gov/

Form1120S.

General Instructions

Purpose of Schedule

Use Schedule D to report the following.

•The overall capital gains and losses from transactions

reported on Form 8949, Sales and Other Dispositions of

Capital Assets.

•Certain transactions the corporation doesn't have to report

on Form 8949.

•Capital gains from Form 6252, Installment Sale Income.

•Capital gains and losses from Form 8824, Like-Kind

Exchanges.

•Gains on distributions to shareholders of appreciated

capital assets.

•Capital gain distributions.

•Tax on built-in gains. See Part III. Built-in Gains Tax, later.

Other Forms the Corporation May

Have To File

Use Form 8949 to report the sale or exchange of a capital

asset (defined later) not reported on another form or

schedule and to report the deferral or exclusion of capital

gains. See the Instructions for Form 8949. Complete all

necessary pages of Form 8949 before you complete line 1b,

2, 3, 8b, 9, or 10 of Schedule D. See Lines 1a and

8a—Transactions Not Reported on Form 8949, later, for more

information about when to use Form 8949.

Use Form 4797, Sales of Business Property, to report the

following.

•The sale, exchange, or distribution of real property used in

a trade or business.

•The sale, exchange, or distribution of depreciable and

amortizable property.

•The sale or other disposition of securities or commodities

held in connection with a trading business, if the corporation

made a mark-to-market election.

•The involuntary conversion (from other than casualty or

theft) of property used in the corporation's trade or business

and capital assets held in connection with a trade or business

or a transaction entered into for profit.

•The disposition of noncapital assets other than inventory

or property held primarily for sale to customers in the ordinary

course of the corporation's trade or business.

•Election to defer a qualified section 1231 gain invested in a

qualified opportunity fund (QOF).

Use Form 4684, Casualties and Thefts, to report

involuntary conversions of property due to casualty or theft.

Use Form 6781, Gains and Losses From Section 1256

Contracts and Straddles, to report gains and losses from

section 1256 contracts and straddles.

Additional information. For more information, see the

instructions for the forms listed above. Also, see Pub. 544,

Sales and Other Dispositions of Assets, and Pub. 550,

Investment Income and Expenses.

Capital Assets

Each item of property the corporation held (whether or not

connected with its trade or business) is a capital asset except

the following.

•Stock in trade or other property included in inventory or

held mainly for sale to customers. However, see the Note

below.

•Accounts or notes receivable acquired in the ordinary

course of the trade or business for services rendered or from

the sale of stock in trade or other property included in

inventory or held mainly for sale to customers.

•Depreciable or real property used in the trade or business,

even if it is fully depreciated.

•Certain copyrights; literary, musical, or artistic

compositions; letters or memoranda; or similar property.

However, see the Note below.

•Certain patents, inventions, models, or designs (whether

or not patented); secret formulas or processes; or similar

property.

•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.

•Certain commodities derivative financial instruments held

by a dealer in connection with its dealer activities.

•Certain identified hedging transactions entered into in the

normal course of the trade or business.

•Supplies regularly used in the trade or business.

For details, see section 1221(a).

Note. The corporation can elect to treat as capital assets

certain musical compositions or copyrights in musical works

it sold or exchanged. See section 1221(b)(3) and Pub. 550

for details.

Short- or Long-Term Gain or Loss

Report short-term gains or losses in Part I. Report long-term

gains or losses in Part II. The holding period for short-term

capital gains and losses is generally 1 year or less. The

holding period for long-term capital gains and losses is

Jan 4, 2024 Cat. No. 64419L