N-35 Sch. D: Capital Gains and Losses and Built-in Gains (Form N-35) (2025)

Who files this form

S corporations use Schedule D (Form N-35) to report sales or exchanges of capital assets and gains from distributing appreciated capital assets to shareholders. The schedule also identifies the gains attributable to Hawaii.

Generally, a corporation with net recognized built-in gain on assets attributable to Hawaii is liable for the built-in gains tax, figured in Part III. Assets are attributable to Hawaii if they are physically located in Hawaii, used in a Hawaii business, or, for intangible assets, the S corporation has its commercial domicile in Hawaii.

What you'll need

Have the following information and applicable forms ready:

• The corporation’s name and federal employer identification number.
• Property descriptions, acquisition and sale dates, gross sales prices, cost or other basis, selling expenses, and gains or losses attributable to Hawaii.
• Federal Form 6252 for capital gains from installment sales.
• Federal Form 8824 for each like-kind exchange. Complete and attach it to the corporation’s return.
• An explanation if you use a basis other than the property’s actual cash cost.
• For Part III, computation schedules for lines 16 and 17, including the required breakdown of built-in gains and losses attributable to Hawaii. Attach the Form N-30 computation or other worksheet used to figure taxable income.

How to file

File Schedule D with Form N-35.

• Report capital assets held one year or less in Part I and those held more than one year in Part II.
• Carry the net short-term gain or loss from line 7 to Form N-35, Schedule K, line 7 or line 10.
• Carry the net long-term gain or loss from line 15 to Form N-35, Schedule K, line 8 or line 10.
• If applicable, figure the built-in gains tax in Part III and carry line 21 to Form N-35, page 2, line 22b.

The supplied text does not provide a mailing address or e-filing directions.

Common mistakes

• Leaving out transactions with no gain or loss. Generally, report sales and exchanges even if there is no gain or loss.
• Using the wrong stock or bond dates. For transactions on an exchange or over-the-counter market, use the trade dates for acquisition and sale.
• Leaving selling expenses out of basis. Before entering column (e), add expenses of sale, such as broker’s fees and commissions, to cost or other basis.
• Missing the like-kind exchange label. Write “Like-Kind Exchange” at the top of Schedule D, or “Related Party Like-Kind Exchange” if a related party was involved.
• Exceeding the line 18 limit. Do not enter more than the excess, if any, of net unrealized built-in gain attributable to Hawaii over net recognized built-in gain attributable to Hawaii for prior years.
• Entering a negative amount on line 20. If line 18 minus line 19 is zero or less, enter zero on both lines 20 and 21.

Questions people ask

What is the difference between short-term and long-term capital gains?

For this schedule, assets held one year or less belong in Part I. Assets held more than one year belong in Part II.

Are all business assets capital assets?

No. The instructions exclude several types of property, including inventory, property held mainly for sale to customers, depreciable or real property used in the business, and supplies regularly used in the business.

Where do I report property that is not a capital asset?

The form directs sales, exchanges, and distributions of property other than capital assets, including property used in a trade or business, to Schedule D-1. For property involuntarily converted because of casualty or theft, use federal Form 4684.

How is the built-in gains tax calculated on the schedule?

Subtract line 19 from line 18. If the result is zero or less, enter zero on lines 20 and 21. Otherwise, line 21 is 6.4% of line 20.

Official sources

• https://files.hawaii.gov/tax/forms/current/n35schd_i.pdf