What Is Form 8949: Sales and Other Dispositions of Capital Assets?

Form 8949: Sales and Other Dispositions of Capital Assets is an Internal Revenue Service (IRS) form used by individuals, partnerships, corporations, trusts, and estates to report capital gains and losses from investment. Taxpayers must use the form to report short- and long-term capital gains and losses from sales or investment exchanges. Before 2011, taxpayers used only Schedule D to report such transactions.

Who Can File Form 8949: Sales and Other Dispositions of Capital Assets?

According to the IRS, individuals, partnerships, corporations, trusts, and estates are able to file this form.

Individuals must use the form to report the following:

  • The sale or exchange of a capital asset not reported on another form or schedule
  • Gains from involuntary conversions (other than from casualty or theft) of capital assets not used in your trade or business
  • Non-business bad debts
  • Worthlessness of a security
  • The election to defer capital gain invested in a Qualified Opportunity Fund
  • The disposition of interests in Qualified Opportunity Funds(s)

Anyone filing a joint return must complete as many copies of the form necessary to report their transactions along with those of their spouse. The forms may be combined or separate, but the totals from every completed Form 8949 must be transferred to Schedule D for both spouses.

Along with the list above, corporations can report on Form 8949 the sale of stock of a specified 10%-owned foreign corporation, adjusted for the dividends-received deduction under section 245A, but only if the sale would otherwise generate a loss.

Taxpayers with an eligible gain can invest it into a Qualified Opportunity Fund and elect to defer part or all of that gain.

How to File Form 8949: Sales and Other Dispositions of Capital Assets

A capital gain or loss is generated when a capital asset is sold and must be reported to the IRS for tax purposes. Schedule D: Capital Gains and Losses of Form 1040 is used to report most capital gain (or loss) transactions. But before an individual can enter the net gain or loss on Schedule D, Form 8949 must be completed. The transactions taxpayers must report on Form 8949 are reported by brokerages annually to the IRS and to taxpayers using Form 1099-B: Proceeds from Broker and Barter Exchange Transactions.

In some cases, Form 1099-B will not report the cost basis of the assets. If this is the case, the taxpayer must determine the basis amount to calculate the gain or loss from a capital asset using a separate Form 8949. A capital asset transaction for which no Form 1099-B (or substitute statement) is issued must be listed on another Form 8949. Form 8949 can also be used to correct any inaccuracies in the data reported on Form 1099-B. If the capital losses or gains for the year are reported for all assets on 1099-B with the correct basis, a Form 8949 is not necessary; Schedule D, however, must still be filed.

Along with the filer's name and taxpayer identification number, the form has two parts that need to be filled in. Part I deals with short-term holding periods. This period is usually one year or less. Part II is used for long-term transactions, which are held for more than one year.

Other Relevant Forms

As mentioned above, Schedule D and Form 1099-B are also required. Form 1099-B reports the cost basis of the investor’s buy and sell transactions. In effect, Form 8949 reflects information about transactions that are captured on Form 1099-B, as well as from the taxpayer’s own records.

Download Form 8949: Sales and Other Dispositions of Capital Assets Here

Click this link to download a copy of Form 8949: Sales and Other Dispositions of Capital Assets.

Key Takeaways

  • Form 8949 is used by individuals, partnerships, corporations, trusts, and estates to report capital gains and losses from investment.
  • Filing this form also requires a Schedule D and a Form 1099-B, which is reported by brokerages to taxpayers.