1041-US: Calculating Form 4952, line 4d and net capital gain from disposition of property held for investment (FAQ)

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Question

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

Answer

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

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

The net capital gain calculates 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 on 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 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 on Screen Income and link the sale to the applicable activity in the Form and Unit columns.

Related topic: 1041-US: Form 4952 (Investment income) FAQs

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