1040-US: Calculation of Form 4952, line 4d - Net gain from the disposition of property held for investment

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Question

How does net capital gain from the disposition of property held for investment (Form 4952, line 4d) calculate?

Answer

The tax application classifies the following as dispositions of property held for investment:

Note: You may force or zero out the amount of capital loss carryover reported on Form 4952 by using the applicable carryover Force fields provided in Screen 4952.

If there is an excess of total gains over total losses from the disposition of property held for investment, an amount displays on line 4d.

The tax application calculates net capital gain as the excess, if any, of net long-term capital gain over net short-term capital loss from the disposition of property held for investment. Capital gain distributions are treated as a long-term capital gain.

Only Form 6252 installment sales forced to Schedule D entered in Screens Sale and InstPY are classified as a disposition of property held for investment. Form 4797 sales are treated as sales derived in the ordinary course of business and not as a disposition of investment property.

Passive activities are not treated as property held for investment (with the exception of rental of substantially nondepreciable property and publicly traded partnerships). If the client has a passive activity that includes a capital gain (loss) that is NOT considered portfolio income, you must enter the information in Screen B&D or Screen Broker and link the sale to the applicable activity in the Form and Unit columns.

Related topic: Investment income and expenses FAQs (1040)

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