11d – Schedule D – Capital Gains and Losses (Form 1040)

📘 Schedule D – Capital Gains and Losses (Form 1040) :-

🔹 Purpose :-
Schedule D is used by individuals to report capital gains and losses from the -*sale or exchange of:
*Stocks, bonds, mutual funds
*Real estate (not used in business)
*Partnership/LLC interests
*Other capital assets
It helps calculate the net capital gain or deductible capital loss, which then flows to Form 1040.

🔹 When to File :-
You must file Schedule D if you had:
*Sales/exchanges of capital assets
*Capital gain distributions (reported on Form 1099-DIV)
*Non-business bad debts
*A carryover of capital loss from a prior year

🔹 Structure of Schedule D :-
1.   Part I – Short-Term Capital Gains and Losses (held ≤ 1 year)
– Reports sales of assets held 1 year or less
– Uses ordinary income tax rates

2.   Part II – Long-Term Capital Gains and Losses (held > 1 year)
– Reports sales of assets held more than 1 year
– Eligible for preferential tax rates (0%, 15%, or 20%)

3.   Part III – Summary
– Combines short- and long-term results
– Applies limitations (e.g., $3,000 annual capital loss deduction for individuals)
– Determines if you have carryover to future years

🔹 Where It Flows :-
The net capital gain/loss from Schedule D is transferred to Form 1040, Schedule 1, Line 7, and ultimately impacts your taxable income.

🔹 Example
*You bought 100 shares of Apple at $100 = $10,000.
*Sold them for $14,000 after 2 years → $4,000 long-term gain.
*You also sold Tesla shares at a $1,500 short-term loss.

On Schedule D:
Part I → Report Tesla loss (-$1,500)
Part II → Report Apple gain (+$4,000)
Part III → Net gain = $2,500 → taxed as long-term capital gain

👉 In short: Schedule D summarizes all your capital gains/losses and determines the final taxable/net capital gain to be included in your return.