Form 1065 (Schedul Capital Gains and Losses

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SCHEDULE D (FORM 1065), PAGE 1 of 4
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OMB No. 1545-0099

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©

Part I

2007

Attach to Form 1065.

Employer identification number

Short-Term Capital Gains and Losses—Assets Held 1 Year or Less

(a) Description of property
(e.g., 100 shares
of “Z” Co.)

1

(b) Date acquired
(month, day, year)

(c) Date sold
(month, day, year)

(d) Sales price
(see instructions)

(e) Cost or other basis
(see instructions)

2

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

2

3

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

3

4

Partnership’s share of net short-term capital gain (loss), including specially allocated short-term
capital gains (losses), from other partnerships, estates, and trusts

4

5

Net short-term capital gain or (loss). Combine lines 1 through 4 in column (f). Enter here and
on Form 1065, Schedule K, line 8 or 11

Part II

Signature

Revised proofs
requested

Capital Gains and Losses

SCHEDULE D
(Form 1065)

Name of partnership

Date

O.K. to print

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Department of the Treasury
Internal Revenue Service

Action

(f) Gain or (loss)
Subtract (e) from (d)

5

Long-Term Capital Gains and Losses—Assets Held More Than 1 Year

(a) Description of property
(e.g., 100 shares
of “Z” Co.)

(b) Date acquired
(month, day, year)

(c) Date sold
(month, day, year)

(d) Sales price
(see instructions)

(e) Cost or other basis
(see instructions)

(f) Gain or (loss)
Subtract (e) from (d)

6

7

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

7

8

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

8

9

Partnership’s share of net long-term capital gain (loss), including specially allocated
long-term capital gains (losses), from other partnerships, estates, and trusts

9

10

Capital gain distributions

10

11

Net long-term capital gain or (loss). Combine lines 6 through 10 in column (f). Enter here and
on Form 1065, Schedule K, line 9a or 11

For Privacy Act and Paperwork Reduction Act Notice, see the Instructions for Form 1065.

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Cat. No. 11393G

Schedule D (Form 1065) 2007

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
SCHEDULE D (FORM 1065), PAGE 2 of 4
MARGINS: TOP 13mm (1⁄ 2 ”), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLDS TO: 216mm (81⁄ 2 ”) x 279mm (11”)
PERFORATE: NONE
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Page

Schedule D (Form 1065) 2007

General Instructions
Section references are to the Internal Revenue
Code.

Purpose of Schedule
Use Schedule D (Form 1065) to report sales or
exchanges of capital assets, capital gain
distributions, and nonbusiness bad debts. Do
not report on Schedule D capital gains (losses)
specially allocated to any partners.
Enter capital gains (losses) specially
allocated to the partnership as a partner in
other partnerships and from estates and trusts
on Schedule D, line 4 or 9, whichever applies.
Enter capital gains (losses) of the partnership
that are specially allocated to partners directly
on line 8, 9a, or 11 of Schedule K. See How
Income Is Shared Among Partners in the
Instructions for Form 1065 for more
information.
Note. For more information, see Pub. 544,
Sales and Other Dispositions of Assets.

Other Forms The Partnership May
Have To File
Use Form 4797, Sales of Business Property, to
report:
● Sales or exchanges of property used in a
trade or business.
● Sales or exchanges of depreciable or
amortizable property.
● Sales or other dispositions of securities or
commodities held in connection with a trading
business, if the partnership made a
mark-to-market election (see page 5 of the
instructions for Form 1065).
● Involuntary conversions (other than from
casualties or thefts).
● The disposition of noncapital assets (other
than inventory or property held primarily for
sale to customers in the ordinary course of a
trade or business).
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. If there are limited
partners, see section 1256(e)(4) for the
limitation on losses from hedging transactions.
Use Form 8824, Like-Kind Exchanges, if the
partnership made one or more like-kind
exchanges. A “like-kind exchange” occurs
when business or investment property is
exchanged for property of a like kind.

What Are Capital Assets?
Each item of property the partnership held
(whether or not connected with its trade or
business) is a capital asset except:
● Stock in trade or other property included in
inventory or held mainly for sale to customers.
● 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 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. See section 1221(a)(3).

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● U.S. Government publications, including the
Congressional Record, that the partnership
received from the Government, other than by
purchase at the normal sales price, or that the
partnership got from another taxpayer who
had received it in a similar way, if the
partnership’s basis is determined by reference
to the previous owner.
● Certain commodities derivative financial
instruments held by a dealer. See section
1221(a)(6).
● Certain hedging transactions entered into in
the normal course of the trade or business.
See section 1221(a)(7).
● Supplies regularly used in the trade or
business.

Items for Special Treatment

● Transactions by a securities dealer. See
section 1236.
● Bonds and other debt instruments. See Pub.
550, Investment Income and Expenses.
● Certain real estate subdivided for sale that
may be considered a capital asset. See
section 1237.
● Gain on the sale of depreciable property to
a more than 50%-owned entity, or to a trust in
which the partnership is a beneficiary, is
treated as ordinary gain.
● Liquidating distributions from a corporation.
See Pub. 550 for details.
● Gain on the sale or exchange of stock in
certain foreign corporations. See section 1248.
● Gain or loss on options to buy or sell,
including closing transactions. See Pub. 550
for details.
● Gain or loss from a short sale of property.
See Pub. 550 for details.
● Transfer of property to a political
organization if the fair market value (FMV) of
the property exceeds the partnership’s
adjusted basis in such property. See section
84.
● Any loss on the disposition of converted
wetland or highly erodible cropland that is first
used for farming after March 1, 1986, is
reported as a long-term capital loss on
Schedule D, but any gain on such a
disposition is reported as ordinary income on
Form 4797. See section 1257 for details.
● Transfer of partnership assets and liabilities
to a newly formed corporation in exchange for
all of its stock. See Rev. Rul. 84-111, 1984-2
C.B. 88.
● Disposition of foreign investment in a U.S.
real property interest. See section 897.
● Any loss from a sale or exchange of
property between the partnership and certain
related persons is not allowed, except for
distributions in complete liquidation of a
corporation. See sections 267 and 707(b) for
details.
● Any loss from securities that are capital
assets that become worthless during the year
is treated as a loss from the sale or exchange
of a capital asset on the last day of the tax
year.
● Nonrecognition of gain on sale of stock to
an employee stock ownership plan (ESOP) or
an eligible cooperative. See section 1042 and
Temporary Regulations section 1.1042-1T for
rules under which the partnership may elect
not to recognize gain from the sale of certain
stock to an ESOP or an eligible cooperative.

● A nonbusiness bad debt must be treated as
a short-term capital loss and can be deducted
only in the year the debt becomes totally
worthless. For each bad debt, enter the name
of the debtor and “schedule attached” in
column (a) of line 1 and the amount of the bad
debt as a loss in column (f). Also attach a
statement of facts to support each bad debt
deduction.
● Any loss from a wash sale of stock or
securities (including contracts or options to
acquire or sell stock or securities) cannot be
deducted unless the partnership is a dealer in
stock or securities and the loss was sustained
in a transaction made in the ordinary course of
the partnership’s trade or business. A wash
sale occurs if the partnership 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.
● Gain from installment sales. If the
partnership sold property at a gain and it will
receive a payment in a tax year after the year
of sale, it generally must report the sale on the
installment method unless it elects not to.
However, the installment method may not be
used to report sales of stock or securities
traded on an established securities market.
Use Form 6252, Installment Sale Income, to
report the sale on the installment method. Also
use Form 6252 to report any payment received
during the tax year from a sale made in an
earlier year that was reported on the
installment method.
If the partnership wants to elect out of the
installment method for installment gain that is
not specially allocated among the partners, it
must report the full amount of the gain on a
timely filed return (including extensions).
If the partnership wants to elect out of the
installment method for installment gain that is
specially allocated among the partners, it must
do the following on a timely filed return
(including extensions):
1. For a short-term capital gain, report the
full amount of the gain on Schedule K, line 8
or 11.
For a long-term capital gain, report the full
amount of the gain on Schedule K, line 9a or
11. Report the collectibles (28%) gain on
Schedule K, line 9b.
2. Enter each partner’s share of the full
amount of the gain on Schedule K-1, box 8 or
9a, or in box 11 using code E, whichever
applies. Report the collectibles (28%) gain on
Schedule K-1, box 9b.
If the partnership filed its original return on
time without making the election, it may make
the election on an amended return filed no
later than 6 months after the due date of the
return (excluding extensions). Write “Filed
pursuant to section 301.9100-2” at the top of
the amended return.
● A sale or other disposition of an interest in a
partnership owning unrealized receivables or
inventory items may result in ordinary gain or
loss. See Pub. 541, Partnerships, for more
details.

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
SCHEDULE D (FORM 1065), PAGE 3 of 4
MARGINS: TOP 13mm (1⁄ 2 ”), CENTER SIDES.
PRINTS: HEAD TO HEAD
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INK: BLACK
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Schedule D (Form 1065) 2007

● Gain from certain constructive ownership
transactions. Gain in excess of the gain that
would have been recognized if the partnership
had held a financial asset directly during the
term of a derivative contract must be treated
as ordinary income. See section 1260 for
details.
● Gain from the sale of collectibles. Report
any collectibles (28%) gain (loss) included on
lines 6 through 10 on line 9b of Schedule K
(and each partner’s share in box 9b of
Schedule K-1). A collectibles (28%) gain (loss)
is any long-term gain or deductible long-term
loss from the sale or exchange of a collectible
that is a capital asset.
Collectibles include works of art, rugs,
antiques, metals (such as gold, silver, and
platinum bullion), gems, stamps, coins,
alcoholic beverages, and certain other tangible
property.
Also include gain (but not loss) from the sale
or exchange of an interest in a partnership or
trust held more than 1 year and attributable to
unrealized appreciation of collectibles. For
details, see Regulations section 1.1(h)-1. Also,
attach the statement reguired under
Regulations section 1.1(h)-1(e).
Special rules for traders in securities.
Traders in securities are engaged in the
business of buying and selling securities for
their own account. To be engaged in business
as a trader in securities:
● The partnership must seek to profit from
daily market movements in the prices of
securities and not from dividends, interest, or
capital appreciation.
● The partnership’s trading activity must be
substantial.
● The partnership must carry on the activity
with continuity and regularity.
The following facts and circumstances
should be considered in determining if a
partnership’s activity is a business:
● Typical holding periods for securities bought
and sold.
● The frequency and dollar amount of the
partnership’s trades during the year.
● The extent to which the partners pursue the
activity to produce income for a livelihood.
● The amount of time devoted to the activity.
Like an investor, a trader must report each
sale of securities (taking into account
commissions and any other costs of acquiring
or disposing of the securities) on Schedule D
or on an attached statement containing all the
same information for each sale in a similar
format. However, if a trader made the
mark-to-market election (see page 5 of the
Instructions for Form 1065), each transaction
is reported in Part II of Form 4797 instead of
Schedule D. Regardless of whether a trader
reports its gains and losses on Schedule D or
Form 4797, the gain or loss from the
disposition of securities is not taken into
account when figuring net earnings from
self-employment on Schedules K and K-1. See
section 1402(i) for an exception that applies to
section 1256 contracts.
The limitation on investment interest
expense that applies to investors does not
apply to interest paid or incurred in a trading
business. A trader reports interest expense
and other expenses (excluding commissions
and other costs of acquiring or disposing of
securities) from a trading business on page 1
of Form 1065.

A trader also may hold securities for
investment. The rules for investors generally
will apply to those securities. Allocate interest
and other expenses between the partnership’s
trading business and its investment securities.
Investment interest expense is reported on line
13b of Schedule K and in box 13 of Schedule
K-1 using code G.
Constructive sale treatment for certain
appreciated positions. Generally, the
partnership must recognize gain (but not loss)
on the date it enters into a constructive sale of
any appreciated position in stock, a
partnership interest, or certain debt
instruments as if the position were disposed of
at FMV on that date.
The partnership is treated as making a
constructive sale of an appreciated position
when it (or a related person, in some cases)
does one of the following:
● Enters into a short sale of the same or
substantially identical property (that is, a
“short sale against the box”).
● Enters into an offsetting notional principal
contract relating to the same or substantially
identical property.
● Enters into a futures or forward contract to
deliver the same or substantially identical
property.
● Acquires the same or substantially identical
property (if the appreciated position is a short
sale, offsetting notional principal contract, or a
futures or forward contract).
Exception. Generally, constructive sale
treatment does not apply if:
● The partnership closed the transaction
before the end of the 30th day after the end of
the year in which it was entered into,
● The partnership held the appreciated
position to which the transaction relates
throughout the 60-day period starting on the
date the transaction was closed, and
● At no time during that 60-day period was
the partnership’s risk of loss reduced by
holding certain other positions.
For details and other exceptions to these
rules, see Pub. 550.
Rollover of gain from qualified stock. If the
partnership sold qualified small business stock
(defined below) it held for more than 6 months,
it may postpone gain if it purchased other
qualified small business stock during the
60-day period that began on the date of the
sale. The partnership must recognize gain to
the extent the sale proceeds exceed the cost
of the replacement stock. Reduce the basis of
the replacement stock by any postponed gain.
If the partnership chooses to postpone gain,
report the entire gain realized on the sale on
line 1 or 6. Directly below the line on which the
partnership reported the gain, enter in column
(a) “Section 1045 Rollover” and enter as a
(loss) in column (f) the amount of the
postponed gain.

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Caution. The partnership also must separately
state the amount of the gain rolled over on
qualified stock under section 1045 on Form
1065, Schedule K, line 11, because each
partner must determine if he or she qualifies
for the rollover at the partner level. Also, the
partnership must separately state on that line
(and not on Schedule D) any gain that would
qualify for the section 1045 rollover at the
partner level instead of the partnership level
(because a partner was entitled to purchase

replacement stock) and any gain on qualified
stock that could qualify for the partial
exclusion under section 1202.
To be qualified small business stock, the
stock must meet all of the following tests:
● It must be stock in a C corporation (that is,
not S corporation stock).
● It must have been originally issued after
August 10, 1993.
● As of the date the stock was issued, the
corporation was a qualified small business. A
qualified small business is a domestic C
corporation with total gross assets of $50
million or less (a) at all times after August 9,
1993, and before the stock was issued and (b)
immediately after the stock was issued. Gross
assets include those of any predecessor of the
corporation. All corporations that are members
of the same parent-subsidiary controlled
group are treated as one corporation.

● The partnership must have acquired the
stock at its original issue (either directly or
through an underwriter), either in exchange for
money or other property or as pay for services
(other than as an underwriter) to the
corporation. In certain cases, the partnership
may meet the test if it acquired the stock from
another person who met this test (such as by
gift or at death) or through a conversion or
exchange of qualified business stock by the
holder.
● During substantially all the time the
partnership held the stock:
1. The corporation was a C corporation,
2. At least 80% of the value of the
corporation’s assets were used in the active
conduct of one or more qualified businesses
(defined below), and
3. The corporation was not a foreign
corporation, domestic international sales
corporation (DISC), former DISC, corporation
that has made (or that has a subsidiary that
has made) a section 936 election, regulated
investment company (RIC), real estate
investment trust (REIT), real estate mortgage
investment conduit (REMIC), financial asset
securitization investment trust (FASIT), or
cooperative.

Note. A specialized small business investment
company (SSBIC) is treated as having met test
2 above.
A qualified business is any business other
than the following:
● One involving services performed in the
fields of health, law, engineering, architecture,
accounting, actuarial science, performing arts,
consulting, athletics, financial services, or
brokerage services.
● One whose principal asset is the reputation
or skill of one or more employees.
● Any banking, insurance, financing, leasing,
investing, or similar business.
● Any farming business (including the raising
or harvesting of trees).
● Any business involving the production of
products for which percentage depletion can
be claimed.
● Any business of operating a hotel, motel,
restaurant, or similar business.

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
SCHEDULE D (FORM 1065), PAGE 4 of 4
MARGINS: TOP 13mm (1⁄ 2 ”), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432mm (17") x 279mm (11") FOLDS TO: 216mm (81⁄ 2 ”) x 279mm (11”)
PERFORATE: NONE
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Page

Schedule D (Form 1065) 2007

Rollover of gain from empowerment zone
assets. If the partnership sold a qualified
empowerment zone asset it held for more than
1 year, it may be able to elect to postpone part
or all of the gain. For details, see Pub. 954,
Tax Incentives for Distressed Communities,
and section 1397B.
Exclusion of gain from qualified community
assets. If the partnership sold or exchanged a
qualified community asset held for more than
5 years, it can exclude any qualified capital
gain. The exclusion applies to an interest in, or
property of, certain qualified community
assets.
Qualified community asset. A qualified
community asset is any of the following.
● Qualified community stock.
● Qualified community partnership interest.
● Qualified community business property.
Qualified capital gain. Qualified capital
gain is any gain recognized on the sale or
exchange of a qualified community asset, but
does not include any of the following.
● Gain treated as ordinary income under
section 1245.
● Section 1250 gain figured as if section 1250
applied to all depreciation rather than the
additional depreciation.
● Gain attributable to real property, or an
intangible asset, that is not an integral part of a
qualified community business.
● Gain from a related-party transaction. See
Sales and Exchanges Between Related
Persons in chapter 2 of Pub. 544.
● See Pub. 954 and section 1400F for more
details on qualified community assets and
special rules.
How to report. Report the entire gain
realized from the sale or exchange as the
partnership otherwise would without regard to
the exclusion. On Schedule D, line 6, enter
“Qualified Community Asset” in column (a) and
enter as a loss in column (f) the amount of the
allowable exclusion. If reporting the sale
directly on Schedule D, line 6, use the line
partnership is reporting the sale to report the
exclusion.
Exclusion of gain from DC Zone assets. If
the partnership sold or exchanged a District of
Columbia Enterprise Zone (DC Zone) asset
that it held for more than 5 years, it may be
able to exclude the qualified capital gain. The
sale or exchange of DC Zone capital assets
reported on Schedule D includes:
● Stock in a domestic corporation that was a
DC Zone business.
● Interest in a partnership that was a DC Zone
business.
Report the sale or exchange of property used
in the partnership’s DC Zone business on
Form 4797.

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Gains not qualified for exclusion. The
following gains do not qualify for the exclusion
of gain from DC Zone assets.
● Gain on the sale of an interest in a
partnership, which is a DC Zone business,
attributable to unrecaptured section 1250 gain.
See the instructions for line 9c of Schedule K
for information on how to report unrecaptured
section 1250 gain.
● Gain on the sale of an interest in a
partnership or S corporation attributable to
real property or an intangible asset which is
not an integral part of the DC Zone business.
● Gain from a related-party transaction. See
Sales and Exchanges Between Related
Persons in chapter 2 of Pub. 544.
See Pub. 954 and section 1400B for more
details on DC Zone assets and special rules.
How to report. Report the entire gain
realized from the sale or exchange as the
partnership otherwise would without regard to
the exclusion. To report the exclusion, enter
“DC Zone Asset Exclusion” on Schedule D,
line 6, column (a) and enter as a (loss) in
column (f) the amount of the exclusion.

Specific Instructions

Columns (b) and (c). Date Acquired
and Date Sold
Use the trade dates for date acquired and date
sold for stocks and bonds traded on an
exchange or over-the-counter market. The
acquisition date for an asset the partnership
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 (d). Sales Price
Enter in this column either the gross sales
price or the net sales price from the sale. On
sales of stocks and bonds, report the gross
amount as reported to the partnership by the
partnership’s broker on Form 1099-B,
Proceeds From Broker and Barter Exchange
Transactions, or similar statement. However, if
the broker advised the partnership that gross
proceeds (gross sales price) less commissions
and option premiums were reported to the
IRS, enter that net amount in column (d).

Column (e). Cost or Other Basis
In general, the cost or other basis is the cost
of the property plus purchase commissions
and improvements and minus depreciation,
amortization, and depletion. If the partnership
got the property in a tax-free exchange,
involuntary conversion, or wash sale of stock,
it may not be able to use the actual cash cost
as the basis. If the partnership does not use
cash cost, attach an explanation of the basis.

Printed on recycled paper

If the partnership sold stock, adjust the
basis by subtracting all the stock-related
nontaxable distributions received before the
sale. This includes nontaxable distributions
from utility company stock and mutual funds.
Also adjust the basis for any stock splits or
stock dividends.
If the partnership elected to recognize gain
on an asset held on January 1, 2001, its basis
in the asset is its closing market price or FMV,
whichever applies, on the date of the deemed
sale and reacquisition, whether the deemed
sale resulted in a gain or an unallowed loss.
If a charitable contribution deduction is
passed through to a partner because of a
bargain sale of property to a charitable
organization, the adjusted basis for
determining gain from the sale is an amount
that has the same ratio to the adjusted basis
as the amount realized has to the FMV.
See section 852(f) for the treatment of
certain load charges incurred in acquiring
stock in a mutual fund with a reinvestment
right.
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
making an entry in column (e).
For more details, see Pub. 551, Basis of
Assets.

Column (f). Gain or (Loss)
Make a separate entry in this column for each
transaction reported on lines 1 and 6 and any
other line(s) that applies to the partnership. For
lines 1 and 6, subtract the amount in column
(e) from the amount in column (d). Enter
negative amounts in parentheses.

Lines 4 and 9. Capital Gains
(Losses) From Other Partnerships,
Estates, and Trusts
See the Schedule K-1 or other information
supplied to you by the other partnership,
estate, or trust.

Line 10. Capital Gain Distributions
On line 10, column (f), report the total amount
of (a) capital gain distributions and (b) the
partnership’s share of undistributed capital
gains from a RIC or REIT. Report the
partnership’s share of taxes paid on
undistributed capital gains by a RIC or REIT on
a statement attached to Form 1065 for
Schedule K, line 15f (and each partner’s share
in box 15 of Schedule K-1 using
code F).