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2024

Instructions for Schedule D

(Form 1120-S)

Capital Gains and Losses and Built-in Gains

Section references are to the Internal Revenue Code unless • Election to defer a qualified section 1231 gain invested in a
otherwise noted. qualified opportunity fund (QOF).
Use Form 4684, Casualties and Thefts, to report
Future Developments involuntary conversions of property due to casualty or theft.
For the latest information about developments related to Use Form 6781, Gains and Losses From Section 1256
Schedule D (Form 1120-S) and its instructions, such as Contracts and Straddles, to report gains and losses from
legislation enacted after they were published, go to IRS.gov/ section 1256 contracts and straddles.
Form1120S.
Additional information. For more information, see the
instructions for the forms listed above. Also, see Pub. 544,
General Instructions Sales and Other Dispositions of Assets, and Pub. 550,
Investment Income and Expenses.
Purpose of Schedule
Use Schedule D to report the following. Capital Assets
• The overall capital gains and losses from transactions Each item of property the corporation held (whether or not
reported on Form 8949, Sales and Other Dispositions of connected with its trade or business) is a capital asset except
Capital Assets. the following.
• Certain transactions the corporation doesn't have to report • Stock in trade or other property included in inventory or
on Form 8949. held mainly for sale to customers. However, see the Note
• Capital gains from Form 6252, Installment Sale Income. below.
• Capital gains and losses from Form 8824, Like-Kind • Accounts or notes receivable acquired in the ordinary
Exchanges. course of the trade or business for services rendered or from
• Gains on distributions to shareholders of appreciated the sale of stock in trade or other property included in
capital assets. inventory or held mainly for sale to customers.
• Capital gain distributions. • Depreciable or real property used in the trade or business,
• Tax on built-in gains. See Part III. Built-in Gains Tax, later. even if it is fully depreciated.
• Certain copyrights; literary, musical, or artistic
Other Forms the Corporation May compositions; letters or memoranda; or similar property.
However, see the Note below.
Have To File
• Certain patents, inventions, models, or designs (whether
Use Form 8949 to report the sale or exchange of a capital or not patented); secret formulas or processes; or similar
asset (defined later) not reported on another form or property.
schedule and to report the deferral or exclusion of capital • U.S. Government publications, including the
gains. See the Instructions for Form 8949. Complete all Congressional Record, that the corporation received from the
necessary pages of Form 8949 before you complete line 1b, government, other than by purchase at the normal sales
2, 3, 8b, 9, or 10 of Schedule D. See Lines 1a and price, or that the corporation got from another taxpayer who
8a—Transactions Not Reported on Form 8949, later, for more had received it in a similar way, if the corporation's basis is
information about when to use Form 8949. determined by reference to the previous owner's basis.
Use Form 4797, Sales of Business Property, to report the • Certain commodities derivative financial instruments held
following. by a dealer in connection with its dealer activities.
• The sale, exchange, or distribution of real property used in • Certain identified hedging transactions entered into in the
a trade or business. normal course of the trade or business.
• The sale, exchange, or distribution of depreciable and • Supplies regularly used in the trade or business.
amortizable property. For details, see section 1221(a).
• The sale or other disposition of securities or commodities
held in connection with a trading business, if the corporation Note. The corporation can elect to treat as capital assets
made a mark-to-market election. certain musical compositions or copyrights in musical works
• The involuntary conversion (from other than casualty or it sold or exchanged. See section 1221(b)(3) and Pub. 550
theft) of property used in the corporation's trade or business for details.
and capital assets held in connection with a trade or business
or a transaction entered into for profit. Short- or Long-Term Gain or Loss
• The disposition of noncapital assets other than inventory Report short-term gains or losses in Part I. Report long-term
or property held primarily for sale to customers in the ordinary gains or losses in Part II. The holding period for short-term
course of the corporation's trade or business. capital gains and losses is generally 1 year or less. The
Instructions for Form 1120SSCHD (2024) Catalog Number 64419L
Oct 4, 2024 Department of the Treasury Internal Revenue Service www.irs.gov

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holding period for long-term capital gains and losses is How to report. If applicable, report the sale or exchange
generally more than 1 year. However, an exception applies on Form 8949, Part II, as the corporation otherwise would
for certain sales of applicable partnership interests. See without regard to the exclusion (with the appropriate box
Transactions with respect to applicable partnership interests, checked). Enter “X” in column (f). Enter the amount of the
later. exclusion as a negative number (in parentheses) in column
(g). Complete all remaining columns. See the Instructions for
For more information about holding periods, see the Form 8949 for details.
Instructions for Form 8949.
Report the sale or exchange of DC Zone business
Items for Special Treatment property on Form 4797. See the Instructions for Form 4797
Note. For more information, see Pub. 544. for details.
Gain from installment sales. If the corporation sold Exclusion of gain from qualified community assets. If
property at a gain and it will receive a payment in a tax year the corporation sold or exchanged a qualified community
after the year of sale, it must generally report the sale on the asset acquired after 2001 and before 2010, it may be able to
installment method unless it elects not to. However, the exclude any qualified capital gain that the corporation would
installment method may not be used to report sales of stock otherwise include in income. The exclusion applies to an
or securities traded on an established securities market. interest in, or property of, certain renewal community
businesses.
Use Form 6252 to report the sale on the installment
method. Also, use Form 6252 to report any payment received Qualified community asset. A qualified community
during the tax year from a sale made in an earlier year that asset is any of the following.
was reported on the installment method. Enter gain from the • Qualified community stock.
installment sales on Schedule D, line 4 or line 11, as • Qualified community partnership interest.
applicable. See the instructions for Form 6252. • Qualified community business property.
Qualified capital gain. Qualified capital gain is any gain
To elect out of the installment method, report the full recognized on the sale or exchange of a qualified community
amount of the gain on Form 8949, Form 4797, or both for the asset, but doesn't include any of the following.
year of the sale on a return filed by the due date (including Gain treated as ordinary income under section 1245.
•
extensions). If the original return was filed on time without Section 1250 gain figured as if section 1250 applied to all
•
making the election, the corporation can make the election depreciation rather than the additional depreciation.
on an amended return filed no later than 6 months after the Gain attributable to real property, or an intangible asset,
•
original due date of the return (excluding extensions). Enter that isn't an integral part of a renewal community business.
“Filed pursuant to section 301.9100-2” at the top of the Gain from a related-party transaction. See Sales and
•
amended return. Exchanges Between Related Persons in chapter 2 of Pub.
Gain on distributions of appreciated property. Generally, 544.
gain (but not loss) is recognized on a nonliquidating • Gains attributable to periods after December 31, 2014.
distribution of appreciated property to the extent that the See section 1400F (as in effect before its repeal) for more
property's fair market value (FMV) exceeds its adjusted details and special rules.
basis. See section 311. How to report. If applicable, report the sale or exchange
Exclusion of gain from DC Zone assets. If the corporation on Form 8949, Part II, as the corporation otherwise would
sold or exchanged a District of Columbia Enterprise Zone without regard to the exclusion (with the appropriate box
(DC Zone) asset acquired after 1997 and before 2012, and checked). Enter “X” in column (f) and enter the amount of the
held for more than 5 years, it can exclude any qualified excluded gain as a negative number (in parentheses) in
capital gain that the corporation would otherwise include in column (g). Complete all remaining columns. See the
income. The exclusion applies to an interest in, or property of, Instructions for Form 8949.
certain businesses operating in the District of Columbia. Report the sale or exchange of qualified community
DC Zone asset. A DC Zone asset is any of the following. business property on Form 4797. See the Instructions for
• DC Zone business stock. Form 4797 for more details.
• DC Zone partnership interest.
Gain on the constructive sale of certain appreciated fi-
• DC Zone business property.
nancial positions. Generally, the S corporation must
Qualified capital gain. Qualified capital gain is any gain recognize gain (but not loss) on the date it enters into a
recognized on the sale or exchange of a DC Zone asset, but constructive sale of any appreciated position in stock, a
doesn't include any of the following. partnership interest, or certain debt instruments as if the
• Gain attributable to periods before 1998 and after 2016. position were disposed of at FMV on that date.
• Gain treated as ordinary income under section 1245.
• Gain attributable to unrecaptured section 1250 gain on the The S corporation is treated as making a constructive sale
sale of an interest in a partnership that is a DC Zone of an appreciated position when it (or a related person, in
business. See the instructions for Form 1120-S, Schedule K, some cases) does one of the following.
line 8c, for information on how to report unrecaptured section • Enters into a short sale of the same or substantially
1250 gain. identical property (that is, a “short sale against the box”).
• Gain on the sale or exchange of an interest in a • Enters into an offsetting notional principal contract relating
partnership attributable to real property or an intangible asset to the same or substantially identical property.
that isn't an integral part of a DC Zone business. • Enters into a futures or forward contract to deliver the
• Gain from a related-party transaction. See Sales and same or substantially identical property.
Exchanges Between Related Persons in chapter 2 of Pub. • Acquires the same or substantially identical property (if the
544. appreciated position is a short sale, an offsetting notional
principal contract, or a futures or forward contract).

2 Instructions for Schedule D (Form 1120-S) (2024)

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Exception. Generally, constructive sale treatment doesn't a portion of a loss recognized on the sale, exchange, or
apply if: retirement of a contingent payment debt instrument subject to
• The S corporation closed the transaction before the end of the noncontingent bond method may be treated as an
the 30th day after the end of the tax year in which it was ordinary loss rather than as a capital loss. See Regulations
entered into, section 1.1275-4(b) and Pub. 1212, Guide to Original Issue
• The S corporation held the appreciated position to which Discount Instruments, for more information on contingent
the transaction relates throughout the 60-day period starting payment debt instruments subject to the noncontingent bond
on the date the transaction was closed, and method. See the Instructions for Form 8949 for detailed
• At no time during that 60-day period was the S information about how to report the disposition of a
corporation's risk of loss reduced by holding certain other contingent payment debt instrument.
positions.
Loss from a sale or exchange between the corporation
For details and other exceptions to these rules, see Pub. and a related person. Except for distributions in complete
550. liquidation of a corporation, no loss is allowed from the sale
Gain from certain constructive ownership transactions. or exchange of property between the corporation and certain
Gain in excess of the net underlying long-term gain the related persons. See section 267.
corporation would have recognized if it had held a financial Loss from a wash sale. A wash sale occurs if the
asset directly during the term of a derivative contract must be corporation acquires (by purchase or exchange), or has a
treated as ordinary income. See section 1260. contract or option to acquire, substantially identical stock or
Gain on disposition of market discount bonds. In securities within 30 days before or after the date of the sale or
general, a capital gain upon the disposition of a market exchange. The corporation can’t deduct a loss from a wash
discount bond is treated as interest income to the extent of sale of stock or securities (including contracts or options to
accrued market discount as of the date of disposition. See acquire or sell stock or securities) unless the corporation is a
sections 1276 through 1278 and Pub. 550 for more dealer in stock or securities and the loss was sustained in a
information on market discount. See the Instructions for Form transaction made in the ordinary course of the corporation's
8949 for detailed information about how to report the trade or business. For more information on wash sales, see
disposition of a market discount bond. section 1091 and Pub. 550.
The wash sale rules don’t apply to a redemption of shares
Gain or loss on distribution of property in complete liq-
in a floating-NAV (net asset value) money market fund
uidation. Generally, gain or loss is recognized on property
(MMF). For redemptions of shares in any MMF after October
distributed in a complete liquidation. Treat the property as if it
2, 2023, the wash sale rules don't apply.
had been sold at its FMV. See section 336.
Report the transaction as the corporation otherwise would
Gain or loss on an option to buy or sell property. See on Form 8949, Part I or II (depending on how long the
sections 1032 and 1234 for the rules that apply to a corporation owned the stock or securities). Check the
purchaser or grantor of an option or a securities futures appropriate box. Enter “W” in column (f). Enter the
contract (as defined in section 1234B). See Pub. 550 for nondeductible loss as a positive number in column (g).
details. Complete all remaining columns. See the Instructions for
Gain or loss from a short sale of property. Report the Form 8949.
gain or loss on Form 8949 to the extent that the property Loss from securities that are capital assets that become
used to close the short sale is considered a capital asset in worthless during the year. Except for securities held by a
the hands of the taxpayer. Report any short sale in the year bank, treat the loss as a capital loss as of the last day of the
the sale closes. tax year. See section 582 for the rules on the treatment of
If a short sale closed in 2024 but the corporation didn’t get securities held by a bank. Also see section 165(g).
a 2024 Form 1099-B (or substitute statement) for it because
Undistributed long-term gains from a regulated invest-
the corporation entered into it before 2011, report it on Form
ment company (RIC) or real estate investment trust (RE-
8949 in Part I with box C checked or Part II with box F
IT). Report the corporation's share of long-term gains from
checked (whichever applies). In column (a), enter (for
example) “100 sh. XYZ Co.—2010 short sale closed.” Fill in Form 2439, Notice to Shareholder of Undistributed
Long-Term Capital Gains, on Form 8949, Part II (with box F
the other columns according to their instructions. Report the
short sale the same way if the corporation received a 2024 checked). Enter “From Form 2439” in column (a). Enter the
gain in column (h). Leave all other columns blank. See the
Form 1099-B (or substitute statement) that doesn't show the
proceeds (sales price). Instructions for Form 8949.
Gain on certain short-term federal, state, and municipal NAV method for money market funds. Report capital gain
obligations (other than tax-exempt obligations). If a or loss determined under the NAV method with respect to
short-term governmental obligation (other than a tax-exempt shares in a money market fund on Form 8949, Part I, with box
obligation) that is a capital asset is acquired at an acquisition C checked. Enter the name of each fund followed by “(NAV)”
discount, a portion of any gain realized is treated as ordinary in column (a). Enter the net gain or loss in column (h). Leave
income and any remaining balance is treated as a short-term all other columns blank. See the Instructions for Form 8949.
capital gain. See section 1271. Deferral of gain invested in a qualified opportunity fund
(QOF). If the corporation realized gain from an actual, or
Contingent payment debt instruments. Any gain
recognized on the sale, exchange, or retirement of a deemed, sale or exchange with an unrelated person and
during the 180-day period beginning on the date the
contingent payment debt instrument subject to the
noncontingent bond method is generally treated as interest corporation realized the gain, invested an amount of the gain
income rather than as capital gain. In certain situations, all or in a QOF, the corporation may be able to elect to temporarily
defer part or all of the gain that would otherwise be included

Instructions for Schedule D (Form 1120-S) (2024) 3

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in income. If the corporation makes the election, the gain is held for more than 6 months, it can postpone gain if it
included in income only to the extent, if any, the amount of purchased other QSB stock during the 60-day period that
realized gain exceeds the aggregate amount invested in a began on the date of the sale. The corporation must
QOF during the 180-day period beginning on the date gain is recognize gain to the extent the sale proceeds exceed the
realized. The corporation may also be able to permanently cost of the replacement stock. Reduce the basis of the
exclude the gain from the sale or exchange of any investment replacement stock by any postponed gain.
in a QOF if the investment is held for at least 10 years. For If the corporation chooses to postpone gain, report the
more information, see section 1400Z-2. entire gain realized on the sale on Form 8949, Part I or II (with
Qualified opportunity fund (QOF). A QOF is any the appropriate box checked). Enter “R” in column (f). Enter
investment vehicle that is organized as either a corporation or the amount of the postponed gain as a negative number (in
partnership for the purpose of investing in eligible property parentheses) in column (g). Complete all remaining columns.
that is located in a qualified opportunity zone and that See the Instructions for Form 8949.
satisfies the ownership requirements of section 1400Z-2.
How to report. If applicable, report the eligible gain on The corporation must also separately state the
Schedule D as it would otherwise be reported if the ! amount of the gain rolled over on qualified stock
corporation were not making the election. See the CAUTION under section 1045 on Form 1120-S, Schedule K,
Instructions for Form 8949 for information on how to report line 10. Each shareholder must determine if they qualify for
the deferral. You will also need to annually attach to your tax the rollover at the shareholder level. Also, the corporation
return Form 8997, Initial and Annual Statement of Qualified must separately state on that line (and not on Form 8949) any
Opportunity Fund (QOF) Investments, until you dispose of the gain that could qualify for the section 1045 rollover at the
QOF investment. For more information, see Form 8997 and shareholder level instead of the corporate level (because a
its instructions. shareholder was entitled to purchase replacement stock). If
the corporation had a gain on qualified stock that could
Bonds and other debt instruments. See Pub. 550. qualify for the exclusion under section 1202, report that gain
Collectibles gain (28% rate gain) or loss. Report any on Form 8949 (and on Form 1120-S, Schedule K, line 10).
28% rate gain or loss on Form 1120-S, Schedule K, line 8b To be QSB stock, the stock must meet all of the following
(and each shareholder's share in box 8b of Schedule K-1 tests.
(Form 1120-S)). A collectibles gain or loss is any long-term • It must be stock in a C corporation.
gain or deductible long-term loss from the sale or exchange • It must have been originally issued after August 10, 1993.
of a collectible that is a capital asset. • As of the date the stock was issued, the corporation was a
Collectibles include works of art, rugs, antiques, metals qualified small business. A qualified small business is a
(such as gold, silver, and platinum bullion), gems, stamps, domestic C corporation with total gross assets of $50 million
coins, alcoholic beverages, and certain other tangible or less (a) at all times after August 9, 1993, and before the
property. stock was issued; and (b) immediately after the stock was
Report any 28% rate gain or loss from a sale or exchange issued. Gross assets include those of any predecessor of the
of a collectible on Form 8949, Part II (with the appropriate box corporation. All corporations that are members of the same
checked). See the Instructions for Form 8949. parent-subsidiary controlled group are treated as one
corporation.
Also include gain (but not loss) from the sale or exchange
of an interest in a partnership or trust held more than 1 year • The corporation must have acquired the stock at its
original issue (either directly or through an underwriter),
and attributable to unrealized appreciation of collectibles.
either in exchange for money or other property or as pay for
See Regulations section 1.1(h)-1. Also, attach the statement
services (other than as an underwriter) to the corporation. In
required under Regulations section 1.1(h)-1(e).
certain cases, the corporation may meet the test if it acquired
Disposition of converted wetland or highly erodible the stock from another person who met this test (such as by
cropland. Any loss on the disposition of converted wetland gift or inheritance) or through a conversion or exchange of
or highly erodible cropland that is first used for farming after QSB stock held by the corporation.
March 1, 1986, is reported as a long-term capital loss on • During substantially all the time the corporation held the
Form 8949, but any gain on such a disposition is reported as stock:
ordinary gain on Form 4797. See section 1257 for details. 1. The issuer was a C corporation;
Nonbusiness bad debts. A nonbusiness bad debt must be 2. At least 80% of the value of the issuer's assets were
treated as a short-term capital loss and can be deducted only used in the active conduct of one or more qualified
in the year the debt becomes totally worthless. See section businesses (defined below); and
166(d) and Nonbusiness Bad Debts in Pub. 550 for details. 3. The issuing corporation wasn't a foreign corporation,
Nonrecognition of gain on sale of stock to an employee domestic international sales corporation (DISC), former
stock ownership plan (ESOP) or an eligible cooperative. DISC, corporation that has made (or that has a subsidiary
See section 1042 and Temporary Regulations section that has made) a section 936 election, RIC, REIT, real estate
1.1042-1T for rules under which the corporation can elect not mortgage investment conduit (REMIC), financial asset
to recognize gain from the sale of certain stock to an ESOP securitization investment trust (FASIT), or cooperative.
or an eligible cooperative. Note. A specialized small business investment company
(SSBIC) is treated as having met test 2 above.
Real estate subdivided for sale. Certain lots or parcels
that are part of a tract of real estate subdivided for sale may A qualified business is any business other than the
be treated as capital assets. See section 1237. following.
• One involving services performed in the field of health, law,
Rollover of gain from qualified small business (QSB) engineering, architecture, accounting, actuarial science,
stock. If the corporation sold QSB stock (defined below) it

4 Instructions for Schedule D (Form 1120-S) (2024)

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performing arts, consulting, athletics, financial services, or treated as short term. An applicable partnership interest is
brokerage services. any interest in a partnership that, directly or indirectly, is
• One whose principal asset is the reputation or skill of one transferred to (or is held by) the taxpayer in connection with
or more employees. the performance of substantial services by the taxpayer, or
• Any banking, insurance, financing, leasing, investing, or any other related person, in any applicable trade or business.
similar business. See section 1061 and Pub. 541 for details.
• Any farming business (including the raising or harvesting Figure gains and losses with respect to the applicable
of trees). partnership interest on Form 8949 by applying the special
• Any business involving the production of products for holding period rules discussed above. See the Instructions
which percentage depletion can be claimed. for Form 8949.
• Any business of operating a hotel, motel, restaurant, or
similar business.
For more details about limits and additional requirements Specific Instructions
that may apply, see Pub. 550 or section 1202. Complete all necessary pages of Form 8949 before
Sale of a partnership interest. A sale or other disposition completing line 1b, 2, 3, 8b, 9, or 10 of Schedule D.
of an interest in a partnership owning unrealized receivables
or inventory items may result in ordinary gain or loss. See Rounding Off to Whole Dollars
Pub. 541, Partnerships. Cents can be rounded to whole dollars on Schedule D. If
Special rules for traders in securities. Traders in cents are rounded to whole dollars, all amounts must be
securities are engaged in the business of buying and selling rounded. To round, drop amounts under 50 cents and
securities for their own account. To be engaged in a business increase amounts from 50 to 99 cents to the next dollar. For
as a trader in securities, the corporation: example, $1.49 becomes $1 and $2.50 becomes $3.
• Must seek to profit from daily market movements in the If two or more amounts have to be added to figure the
prices of securities and not from dividends, interest, or capital amount to enter on a line, include cents when adding the
appreciation; amounts and round off only the total.
• Must be involved in a trading activity that is substantial;
and Disposal of QOF Investment
• Must carry on the activity with continuity and regularity. If you disposed of any investment in a QOF during the tax
The following facts and circumstances should be year, check the box on the top of Schedule D and see the
considered in determining if a corporation's activity is a Instructions for Form 8949 for additional reporting
business. requirements.
• Typical holding periods for securities bought and sold.
• The frequency and dollar amounts of the corporation's Parts I and II
trades during the year.
• The extent to which the shareholders pursue the activity to Lines 1a and 8a—Transactions Not Reported on
produce income for a livelihood. Form 8949
• The amount of time devoted to the activity. The corporation can report on line 1a (for short-term
Like an investor, a trader must generally report each sale transactions) or line 8a (for long-term transactions) the
of securities (taking into account commissions and any other aggregate totals from any transactions (other than sales of
costs of acquiring or disposing of the securities) on Form collectibles) for which:
8949 unless one of the exceptions described under • The corporation received a Form 1099-B (or substitute
Exceptions to reporting each transaction on a separate row in statement) that shows basis was reported to the IRS and
the Instructions for Form 8949 applies. However, if a trader doesn't show any adjustments in box 1f or box 1g;
made the mark-to-market election (see the Instructions for • The Ordinary checkbox in box 2 of Form 1099-B (or
Form 4797), each transaction is reported in Part II of Form substitute statement) isn't checked;
4797 instead of on Form 8949. • The QOF checkbox in box 3 of Form 1099-B (or substitute
The limitation on investment interest expense that applies statement) isn’t checked; and
to investors doesn't apply to interest paid or incurred in a • The corporation doesn't need to make any adjustments to
trading business. A trader reports interest expense and other the basis or type of gain or loss reported on Form 1099-B (or
expenses (excluding commissions and other costs of substitute statement), or to its gain or loss.
acquiring and disposing of securities) from a trading business See How To Complete Form 8949, Columns (f) and (g) in
on page 1 of Form 1120-S. the Instructions for Form 8949 for details about possible
A trader may also hold securities for investment. The rules adjustments to the corporation's gain or loss.
for investors will generally apply to those securities. If they
apply, allocate interest and other expenses between the If the corporation chooses to report these transactions on
corporation's trading business and investment securities. lines 1a and 8a, don’t report them on Form 8949. Also, the
Report investment interest expense on Form 1120-S, corporation doesn’t need to attach a statement to explain the
Schedule K, line 12c; and in box 12 of Schedule K-1 (Form entries on lines 1a and 8a.
1120-S) using code H. Figure gain or loss on each line. Subtract the cost or other
Transactions with respect to applicable partnership in- basis in column (e) from the proceeds (sales price) in column
terests. The long-term holding period for gains and losses (d). Enter the gain or loss in column (h). Enter negative
with respect to applicable partnership interests is more than 3 amounts in parentheses.
years. If the holding period is 3 years or less, gains and Example 1—basis reported to the IRS. The
losses with respect to applicable partnership interests are corporation received a Form 1099-B reporting the sale of

Instructions for Schedule D (Form 1120-S) (2024) 5

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stock held for 3 years, showing proceeds (in box 1d) of            An S corporation may owe the tax if it has net recognized 
$6,000 and cost or other basis (in box 1e) of $2,000. Box 12     built-in gain during the applicable recognition period. For 
is checked, meaning that basis was reported to the IRS. The      computation details, see Regulations section 1.1374-1(a).
corporation doesn't need to make any adjustments to the 
amounts reported on Form 1099-B or enter any codes. This           The applicable recognition period is the 5-year period 
was the corporation's only 2024 transaction. Instead of          beginning:
reporting this transaction on Form 8949, the corporation can     • For an asset held when the S corporation was a C 
enter $6,000 on Schedule D, line 8a, column (d); $2,000 in       corporation, on the first day of the first tax year for which the 
column (e); and $4,000 ($6,000 − $2,000) in column (h).          corporation is an S corporation; or
  If the corporation had a second transaction that was the       • For a transferred-basis acquisition, on the date the asset 
same except that the proceeds were $5,000 and the basis          was acquired by the S corporation.
was $3,000, combine the two transactions. Enter $11,000            A corporation described in both (1) and (2) above must 
($6,000 + $5,000) on Schedule D, line 8a, column (d); $5,000     figure the built-in gains tax separately for the group of assets 
($2,000 + $3,000) in column (e); and $6,000 ($11,000 −           it held at the time its S election became effective and for each 
$5,000) in column (h).                                           group of transferred-basis acquisitions. For details, see 
  Example 2—basis not reported to the IRS.  The                  Regulations section 1.1374-8.
corporation received a Form 1099-B showing proceeds (in 
box 1d) of $6,000 and cost or other basis (in box 1e) of           Certain transactions involving the disposal of timber, coal, 
$2,000. Box 12 isn't checked, meaning that basis wasn't          or domestic iron ore under section 631 aren’t subject to the 
reported to the IRS. Don’t report this transaction on line 1a or built-in gains tax. See Rev. Rul. 2001-50, which is on 
line 8a. Instead, report the transaction on Form 8949.           page 343 of Internal Revenue Bulletin 2001-43 at
Complete all necessary pages of Form 8949 before                 IRS.gov/pub/irs-irbs/irb01-43.pdf.
completing line 1b, 2, 3, 8b, 9, or 10 of Schedule D.
                                                                 Line 16
  Example 3—adjustment.      The corporation received a 
Form 1099-B showing proceeds (in box 1d) of $6,000 and           Generally, enter the amount that would be the taxable income 
cost or other basis (in box 1e) of $2,000. Box 12 is checked,    of the corporation for the tax year if only recognized built-in 
meaning that basis was reported to the IRS. However, the         gains (including any carryover of gain under section 1374(d)
basis shown in box 1e is incorrect. Don’t report this            (2)(B)) and recognized built-in losses were taken into 
transaction on line 1a or line 8a. Instead, report the           account.
transaction on Form 8949. See the instructions for Form 
                                                                   Generally, recognized built-in gain includes the following 
8949, columns (f), (g), and (h). Complete all necessary 
                                                                 items.
pages of Form 8949 before completing line 1b, 2, 3, 8b, 9, or 
10 of Schedule D.                                                  1. Any gain recognized during the applicable recognition 
                                                                 period on the sale, distribution, or other disposition of any 
Lines 1b, 2, 3, 8b, 9, and 10, Column                            asset, except to the extent the corporation establishes that:
(h)—Transactions Reported on Form 8949                             a. The asset wasn't held by the corporation as of the 
Figure gain or loss on each line. First, subtract cost or other  beginning of the applicable recognition period, or
basis in column (e) from proceeds (sales price) in column (d).     b. The gain exceeds the excess of the FMV of the asset 
Then, combine the results with any adjustments in column         as of the beginning of the applicable recognition period over 
(g). Enter the results in column (h). Enter negative amounts in  the adjusted basis of the asset at that time.
parentheses.                                                       2. Any item of income that is properly taken into account 
  Example 1—gain.      Column (d) is $6,000 and column (e)       during the applicable recognition period but is attributable to 
is $2,000. Enter $4,000 in column (h).                           periods before the applicable recognition period.
  Example 2—loss.      Column (d) is $6,000 and column (e)         Generally, recognized built-in loss includes the following 
is $8,000. Enter ($2,000) in column (h).                         items.
  Example 3—adjustment.      Column (d) is $6,000, column          1. Any loss recognized during the applicable recognition 
(e) is $2,000, and column (g) is ($1,000). Enter $3,000          period on the disposition of any asset to the extent the 
($6,000 − $2,000 − $1,000) in column (h).                        corporation establishes that:
                                                                   a. The asset was held by the corporation as of the 
Line 13. Capital Gain Distributions                              beginning of the applicable recognition period; and
Enter the total capital gain distributions paid to the             b. The loss doesn't exceed the excess of the adjusted 
corporation during the year.                                     basis of the asset as of the beginning of the applicable 
                                                                 recognition period, over the FMV of the asset as of that time.
Part III. Built-in Gains Tax
Section 1374 provides for a tax on built-in gains. The built-in    2. Any amount that is allowed as a deduction during the 
gains tax may apply to the following S corporations.             applicable recognition period (determined without regard to 
                                                                 any carryover) but is attributable to periods before the 
  1. An S corporation that was a C corporation before it         applicable recognition period.
elected to be an S corporation.
  2. An S corporation that acquired an asset with a basis          For details, see section 1374(d) and Regulations section 
determined (in whole or in part) by reference to its basis (or   1.1374-4.
the basis of any other property) in the hands of a C               The corporation must show on an attachment its total net 
corporation (a transferred-basis acquisition). See section       recognized built-in gain and list separately any capital gain or 
1374(d)(8).                                                      loss and ordinary gain or loss.

6                                                                         Instructions for Schedule D (Form 1120-S) (2024)

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Line 17 acquired in a transferred-basis acquisition (defined earlier).
Figure taxable income by completing lines 1 through 28 of The section 1374(b)(2) deduction must be figured and
Form 1120. Follow the Instructions for Form 1120. Enter the applied separately for each separate group of assets. See
amount from line 28 of Form 1120 on line 17 of Schedule D. section 1374(b)(2) and Regulations section 1.1374-5.
Attach to Schedule D the Form 1120 computation or other
Line 22
worksheet used to figure taxable income.
Enter the section 1374(b)(3) credit. Generally, this is any
For corporations figuring the built-in gains tax for separate
general business credit arising in tax years for which the
groups of assets, taxable income must be apportioned to
corporation was a C corporation or acquired in a
each group of assets in proportion to the net recognized
transferred-basis acquisition (defined earlier). The section
built-in gain for each group of assets. For details, see
1374(b)(3) credit must be figured and applied separately for
Regulations section 1.1374-8.
each separate group of assets. Section 1374(b)(3) business
Note. Taxable income is figured as provided in section credit and minimum tax credit carryforwards from C
1375(b)(1)(B) and is generally figured in the same manner as corporation years are subject to the business credit limitation
taxable income for line 9 of the Excess Net Passive Income in section 38(c) and the alternative minimum tax (AMT) credit
Tax Worksheet for Line 23a in the Instructions for Form limitation in section 53(c), as modified by Regulations section
1120-S. 1.1374-6(b).
The AMT refundable credit provisions do not apply to
Line 18 ! S corporations. See sections 1371(b)(1) and 1374(b)
If, for any tax year in the recognition period, the amount on CAUTION (3)(B).
line 16 exceeds the taxable income on line 17, the excess is
treated as a recognized built-in gain in the succeeding tax Line 23
year. This carryover provision applies only in the case of an S
corporation that made its election to be an S corporation after The built-in gains tax is treated as a loss sustained by the
March 30, 1988. See section 1374(d)(2)(B). corporation during the same tax year. The character of the
deemed loss is determined by allocating the loss
For corporations figuring the built-in gains tax for separate proportionately among the net recognized built-in gains
groups of assets, don’t use the amount from Form 1120-S, giving rise to the tax and attributing the character of each net
Schedule B, line 8. Instead, figure the amount of net recognized built-in gain to the allocable portion of the loss.
unrealized built-in gain separately for each group of assets. Deduct the tax attributable to the following.
• Short-term capital gain as short-term capital loss on
Line 19 Schedule D, line 6.
Enter the section 1374(b)(2) deduction. Generally, this is any • Long-term capital gain as long-term capital loss on
net operating loss (NOL) carryforward or capital loss Schedule D, line 14.
carryforward (to the extent of net capital gain included in • Ordinary income as a deduction for taxes on Form 1120-S,
recognized built-in gain for the tax year) either arising in tax line 12.
years for which the corporation was a C corporation or

Instructions for Schedule D (Form 1120-S) (2024) 7

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