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Form 4797N 2012 Special Capital Gains/Extraordinary Dividend Election and Computation
1 Distributions considered ordinary income or reported on Form W 2 and not on Federal Form 8949 do not qualify 1 Has a previous special capital gains/extraordinary dividend election been made either by or on behalf of the employee? 1 Has been in existence and actively doing business in Nebraska for at least three years; 1 Less than zero; or 1 Sales and exchanges of the qualifying stock in any taxable year beginning with the taxable year the election was made; and 1 Sales price of the capital stock (attach Federal Form 8949 and Federal Schedule D) 1 1 Through the creation or purchase of a corporation by an investor who is not an employee; 1 What is your relationship to the employee? 10 Enter the amount of the dividend received (attach Federal Schedule B and other federal documentation) 10 2 Cost or other basis in capital stock 2 2 For services performed for a corporation by a non employee; or 2 Greater than Tax Table Income line 14 from Form 1040N without the exclusion 2 Has at least five shareholders; and 2 Is the employee still living? 2 Losses on the qualifying capital stock must be netted against gains on the qualifying capital stock to determine the amount to enter on line 3 2 Name of the corporation issuing the capital stock: 2 Sales and exchanges of stock owned by a spouse or descendant received as a gift including a gift in trust from the employee during his or her lifetime Stock received by a non employee through a will or testamentary trust does not qualify for the exclusion 2 Was the capital stock a gift from the employee? (Note inherited stock is not a gift and does not qualify ) 3 Capital gains on sales of capital stock during this year (line 1 minus line 2) 3 3 Description of the capital stock: 3 Has no more than 90% of the capital stock held by any single shareholder or group of related shareholders 3 If you are a qualified spouse were you married to the employee on the date of the sale of the capital stock or the date the dividend was declared? 3 Stock that was inherited or transferred through a testamentary trust 3 Was the employee married on the date of the employee s death AND is the spouse still living? 4 Are you the oldest surviving descendant (for example child grandchild)? 4 Capital gains exclusion deferred from a prior year 4 4 Has this corporation conducted business in Nebraska for at least three years before the first sale or exchange of capital stock or 4 If a trust is claiming the exclusion was trust created while the employee was living and are all the beneficiaries either the spouse or 5 or More Continue 5 Total capital gains available for exclusion (line 3 from all forms plus line 4) 5 5 Was the corporation a publicly traded corporation? 6 How many shareholders did the corporation have at the time of the first sale or exchange of capital stock or declaration of extraordinary dividend? 6 Limitation on capital gains exclusion (see instructions) 6 7 Allowable capital gains (smaller of line 5 or line 6) 7 7 Did a shareholder or group of related shareholders hold more than 90% of the capital stock at the time of the first sale or exchange of capital stock or declaration of extraordinary dividend? 8 Capital gains exclusion deferred to next year (line 5 minus line 7) 8 9 Enter the fair market value of the capital stock on the date the dividend was declared 9 Attach this page to Form 1040N or Form 1041N b If result is greater than 20 enter the amount from line 10 on line 11b If the c Total extraordinary dividends available for exclusion (line 11b from all forms) 11c Complete this part to make the Special Capital Gains/Extraordinary Dividend Election declaration of extraordinary dividend? descendants of the employee? Description of the capital stock: from: to: I hereby elect to receive the special capital gains/extraordinary dividend treatment provided under Neb Rev Stat 77 2715 09 and declare under penalties of perjury that to the best of my knowledge and belief the capital stock described above qualifies for the special capital gains/extraordinary dividend election If the capital stock was not acquired while employed explain how the capital stock was acquired on account of employment If you are not the employee complete Part III and also Page 1 If you are not the employee complete Parts I and II If you are not the employee complete Parts I II III and also Page 1 If you are the employee complete Page 1 If you are the employee complete Part I If you are the employee complete Part I and Page 1 Less than 5 STOP The corporation does not qualify for the election Month/Day/Year Month/Day/Year Name of the Employee Who Originally Acquired the Capital Stock Employee s Social Security Number Name of the employee who originally acquired the capital stock if different from the name on Form 1040N: Social Security Number Name of the Person Making the Election (if not the employee complete Part II) Social Security Number Name on Form 1040N or Form 1041N Social Security Number NO Continue NO Continue NO Continue to signature NO STOP The capital stock does not qualify NO STOP The capital stock does not qualify NO STOP The corporation does not qualify for the election NO STOP You do not qualify to make the election PART II DETERMINE IF A NON EMPLOYEE QUALIFIES TO MAKE PART III DETERMINE IF THE CAPITAL STOCK QUALIFIES Partial year residents do not include this amount on line 64 Schedule III Form 1040N 12 Period of time during which the capital stock was acquired by the employee Period of time during which the employee was employed by the corporation result is equal to or less than 20 enter ( 0 ) on line 11b 11b Signature of Employee Surviving Spouse or Descendant Making this Election Date Spouse Descendant (Oldest child or grandchild) Other STOP You do not qualify to make the election Spouse Descendant Trust THE ELECTION YES Complete the EXCLUSION COMPUTATION on page 1 YES Continue YES If you are the spouse go to Part I to make the election All others STOP Only the spouse can make the election YES If you are the spouse go to the next question If you represent the trust go to Question 4 If you are a descendant complete the EXCLUSION COMPUTATION on page 1 YES Skip to signature YES STOP Only one election is available for an employee (see instructions) YES STOP Only the employee can make the election YES STOP The corporation does not qualify for the election YES You may go to Part I to make the election (If no election has been made previously go to Part I ) 11 a Divide line 10 by line 9 11a 12 Allowable exclusion (line 7 plus line 11c) Enter here and on line 54 Nebraska Schedule I 8 449 2012 A surviving spouse is a spouse who was married to the employee on the date of the employee's death CAPITAL GAINS Capital Stock Capital stock is common or preferred stock and may be either voting or nonvoting Capital stock does not include stock rights stock warrants stock options debt securities or cash distributions from employee stock ownership plans CAUTION The amount on line 6 of this form cannot be: Descendant Descendant is a direct descendant of the employee (for example child or grandchild) DESCRIPTION OF THE CAPITAL STOCK Enter the description of the capital stock (for example 100 shares of 7% preferred voting stock ) ELECTION AND COMPUTATION Employee Employee is an individual subject to withholding who is or was employed by a qualified corporation and who obtained the capital stock either: (1) because of employment by the qualified corporation; or (2) while employed by the qualified corporation EXCLUSION COMPUTATION Extraordinary Dividend Extraordinary dividend is any dividend that is more than 20% of the fair market value of the related stock on the date the dividend is declared EXTRAORDINARY DIVIDENDS FORM 4797N FORM 4797N GENERAL INSTRUCTIONS HOW TO COMPLETE THIS FORM IF THE CAPITAL STOCK WAS NOT ACQUIRED WHILE EMPLOYED If the date the capital stock was acquired is not during employment dates attach an explanation of how the capital stock was acquired because of either employment or while employed by the corporation If the name of the corporation which issued the stock is different than the corporation name appearing on line 4 of the Part I election attach an explanation as to how the corporations are related and why the gain or dividend being excluded qualifies for the income exclusion If there is no surviving spouse then the oldest living descendant may make the election If you are not the employee go to Part III If you are not the employee use Part II to determine if you qualify to make the election Income from the sale or exchange of capital stock owned by the spouse or descendant will only qualify for the exclusion if the employee could have taken the exclusion for the same shares if the employee still owned them To qualify shares owned by the spouse or descendant must have been received as a gift from the employee while the employee was alive Any shares that are inherited or received because of the death of the employee such as a testamentary trust do not qualify for the exclusion Increase the basis by any expenses of the sale such as broker s fees commissions and option premiums before making an entry on line 2 unless net sales price was reported on line 1 LINE 1 Sales Price of the Capital Stock Enter the sales price of the capital stock as shown on the Federal Form 8949 If a broker advised that the gross proceeds (gross sales price) less commission and option premium were reported to the Internal Revenue Service enter the net amount on line 1 Do not include the commission and option premium on line 2 LINE 10 Enter the Amount of the Dividend Received Do not include any distribution or the portion of a distribution that is not treated as a dividend on the federal return such as a return of capital LINE 11 Total Extraordinary Dividends Available for Exclusion For the extraordinary dividend exclusion to be eligible the dividend must be greater than 20% of the fair market value of the capital stock on the dividend declaration date If more than one extraordinary dividend was received complete a separate Page 1 for each dividend Compute the percentage separately for each dividend and add all of the line 11b amounts on a single line 11c on Page 1 LINE 2 All capital stock owned by the spouse or descendants must have been received from the employee by gift Any shares that are inherited or that were transferred as a result of the death of the employee are ineligible for the exclusion LINE 2 Cost or Other Basis in Capital Stock In general the cost or other basis is the cost of the capital stock as shown on the Federal Form 8949 If cash cost was not used as a basis attach an explanation of your basis LINE 3 Capital Gains on Sales of Capital Stock During this Year Enter the amount of the capital gains on qualifying capital stock transactions this year LINE 3 The spouse must have been married to the employee at the time of the sale of the capital stock whether or not married at the time the return is filed or the date of death of the employee if deceased LINE 4 Capital Gains Exclusion Deferred from a Prior Year Enter the amount of the qualified capital gain on transactions in prior years that was carried forward LINE 4 Shares held by an inter vivos trust created for the benefit of the spouse or descendants qualify for the exclusion if the exclusion would have applied to shares owned directly by the spouse or descendants at the time of the sale; and if the rights to the shares in the trust were not changed by the death of the employee When a trust is claiming the exclusion please contact the Nebraska Department of Revenue for specific instructions LINE 5 Publicly traded corporations meet the ownership requirements and lines 6 and 7 do not have to be completed LINE 6 If you answered No to question 5 the corporation must have at least five shareholders in order to be a qualified corporation LINE 6 Limitation on Capital Gains Exclusion If line 13 Federal Form 1040 or line 4 Federal Form 1041 is a capital gain add that amount to $3 000 ($1 500 if married filing separately) Enter the result on line 6 of this form If the amount is a capital loss enter $3 000 ($1 500 if married filing separately) less the amount of the loss LINE 7 The qualified corporation must have some unrelated shareholders If a group of shareholders who are related to each other hold more than 90% of the shares of the stock the company is too closely held to qualify LINE 8 Capital Gains Exclusion Deferred to Next Year If line 5 is greater than line 7 on this form subtract line 7 from line 5 This is the qualified gain that may be carried over and excluded in future years If line 5 is less than line 7 enter ( 0 ) MULTIPLE EXTRAORDINARY DIVIDENDS One extraordinary dividend may be included on the same Page 1 as a special capital gains exclusion if it is from capital stock from the same employee A separate Page 1 is required for each additional extraordinary dividend declared during the year MULTIPLE SALES OF CAPITAL STOCK FROM ONE EMPLOYEE When multiple sales of capital stock from one employee were made during the tax year combine all sales onto a single Page 1 to determine the exclusion NAME OF PERSON MAKING ELECTION If the election is being made on this return enter the phrase See Part I If an election was previously made attach a copy of the Form 4797N where the initial election was previously made either by you or the qualified person Name of person making the election or who previously made the election if different than above Year the Election Was Made Social Security Number NAME OF THE CORPORATION ISSUING THE CAPITAL STOCK Enter the name of the corporation that issued the capital stock If capital stock issued by more than one corporation is included under the same election list the names of all corporations Name of the corporation issuing the capital stock If different than the name previously provided on the election explain Name on Form 1040N or Form 1041N Social Security Number Non Qualified Stock Non qualified stock is stock that does not qualify for the exclusion because it was received: Once the election is made for an employee that election will apply to sales or exchanges of capital stock of the selected corporation for the employee the spouse or descendants The spouse or descendant must attach a copy of the completed election for the exclusion to apply Once the election is made the following transactions by a resident or by a partial year resident while a resident qualify for the income exclusion: OTHER CORPORATIONS The election also applies to the capital stock of other corporations that are related to the elected corporation such as a parent or subsidiary Brother sister corporations do not qualify under the same election The election also applies to the capital stock of a corporation that was a party to a tax free reorganization with the elected corporation that occurred during or after the time the employee was employed by the elected corporation If the name of the corporation is not the same as the name on the election include an explanation of how the named corporation is a qualified corporation PAGE I GENERAL INSTRUCTIONS PAGE I SPECIFIC INSTRUCTIONS Part I PART I ELECTION PART I INSTRUCTIONS Part I is only to be completed if an election has never been made for the employee who originally received the stock If a previous election has been made for the employee that is the only election allowed PART II DETERMINE IF A NON EMPLOYEE QUALIFIES TO MAKE THE ELECTION PART II INSTRUCTIONS Part II is only completed when an election has not been previously made and a person other than the employee needs to make the election If the employee is alive then only the employee can make the election If the employee died without making the election the surviving spouse may make the election provided the election could have been made by the employee PART III DETERMINE IF THE CAPITAL STOCK QUALIFIES PART III INSTRUCTIONS Part III is only completed when a person other than the employee wants to exclude income from the sale or exchange of qualifying capital stock or an extraordinary dividend The election applies to sales or exchanges of qualifying capital stock when made by the spouse or descendants of the employee Parts II and III Qualified Corporation Qualified corporation is any corporation which (at the time of the first sale or exchange of capital stock or declaration of extraordinary dividend on capital stock for which the election is made): QUALIFYING CAPITAL STOCK To exclude income from the sale or exchange of capital stock of a corporation it is necessary to determine if the specific shares that were sold or exchanged qualify for the exclusion To qualify the shares must have been acquired either while the employee was employed by the corporation or on account of employment SALES OF CAPITAL STOCK FROM MORE THAN ONE EMPLOYEE When multiple sales of capital stock from more than one employee were made during the tax year whether the spouse is also an employee or the capital stock was gifted complete a separate Page 1 for each employee s capital stock The separate Page 1's must be completed through line 3 Then consolidate the amounts on lines 4 through 8 on a single Page 1 Shareholders are related if one is married to a lineal ancestor or descendent of or is the brother sister aunt uncle cousin niece or nephew of another person who owns capital stock either directly or indirectly Shareholders who are otherwise unrelated are related if they are each related to the same person Shares acquired while an employee can be either shares received from the corporation as compensation shares received for retirement purposes or shares the employee acquired on their own in the open market If the shares were not acquired while employed they must have been acquired on account of employment For the shares to have been acquired on account of employment the employee must have received a vested right to the shares from the corporation while employed An option from the employer that is considered to be compensation that can be exercised without any additional payment would be on account of employment SPECIAL CAPITAL GAINS/EXTRAORDINARY DIVIDEND TERMS THE ELECTION THE EXCLUSION This election may be made for the capital stock of one corporation The election may only be made once for an individual and once made the election may not be changed The election may be made even if there is no sale or exchange of stock or no extraordinary dividend is received Each spouse may make their own election and it may be for a different corporation To exclude income if an election has previously been made To make an election and exclude income To make an election without excluding any income TOTAL EXCLUSION When selling capital stock adjust your basis by subtracting all the nontaxable distributions received before the sale Also adjust the basis for any stock splits www revenue ne gov 800 742 7474 (NE and IA) 402 471 5729