2021 Instructions for Schedule D (568) Capital Gain or Loss
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).
Gross Income Exclusion for Bruce’s Beach – Effective September 30, 2021, California law allows an exclusion from gross income for the first time sale in the taxable year in which the land within Manhattan State Beach, known as “Peck’s Manhattan Beach Tract Block 5” and commonly referred to as “Bruce’s Beach” is sold, transferred, or encumbered. A recipient’s gross income does not include the following:
- Any sale, transfer, or encumbrance of Bruce’s Beach;
- Any gain, income, or proceeds received that is directly derived from the sale, transfer, or encumbrance of Bruce’s Beach.
In general, for taxable years beginning on or after January 1, 2015, California law conforms to the Internal Revenue Code (IRC) as of January 1, 2015. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, go to ftb.ca.gov and search for conformity. Additional information can be found in FTB Pub. 1001, Supplemental Guidelines to California Adjustments, the instructions for Schedule CA (540), California Adjustments – Residents, or Schedule CA (540NR), California Adjustments – Nonresidents or Part-Year Residents, and the Business Entity tax booklets.
The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax returns. We include information that is most useful to the greatest number of taxpayers in the limited space available. It is not possible to include all requirements of the California Revenue and Taxation Code (R&TC) in the instructions. Taxpayers should not consider the instructions as authoritative law.
Use Schedule D (568), Capital Gain or Loss, to report the sale or exchange of capital assets, by the limited liability company (LLC), except capital gains (losses) that are specially allocated to any members. Do not use this form to report the sale of business property. For sales of business properties, use California Schedule D-1, Sale of Business Property.
Nonresident and Part-Year Resident Members, get FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency.
Capital loss carryover and capital loss limitations for nonresident members and part-year resident members, for the portion of the year they were nonresidents, are determined based upon California source income and loss items only for the computation of their California taxable income (R&TC Section 17041). Moreover, the character of their gains and losses on the sale or exchange of property used in trade or business or certain involuntary conversions (IRC Section 1231) are determined for purposes of calculating their California taxable income by netting California sources Section 1231 gains and losses only.
California law conforms to federal law for the recognition of gain on a constructive sale of property in which the LLC held an appreciated interest.
Enter specially allocated short-term capital gains (losses) received from LLCs classified as partnerships, partnerships, S corporations, and fiduciaries on Schedule D (568), line 3. Enter specially allocated long-term capital gains (losses) received from LLCs classified as partnerships, partnerships, S corporations, and fiduciaries on Schedule D (568), line 7. Enter short-term and long-term capital gains (losses) that are specially allocated to members on Schedule K-1 (568), Member’s Share of Income, Deductions, Credits, etc. Do not include these amounts on Schedule D (568). See the instructions for Schedule K (568), Members’ Shares of Income, Deductions, Credits, etc., and Schedule K-1 (568) for more information. Also, refer to the instructions for federal Schedule D (1065), Capital Gains and Losses.
Qualified Opportunity Zone Funds – The TCJA established Opportunity Zones. IRC Sections 1400Z-1 and 1400Z-2 provide a temporary deferral of inclusion of gross income for capital gains reinvested in a qualified opportunity fund, and exclude capital gains from the sale or exchange of an investment in such funds. California does not conform to the deferral and exclusion of capital gains reinvested or invested in federal opportunity zone funds under IRC Sections 1400Z-1 and 1400Z-2, and has no similar provisions. If, for California purposes, gains from investment in qualified opportunity zone property had been included in income during previous taxable year, do not include the gain in the current year income.