4797N: Special Capital Gains Election and Computation (2024)
Nebraska · Nebraska DOR · Used for tax years 2024
Nebraska Form 4797N is used to make the Special Capital Gains/Extraordinary Dividend Election and calculate the allowable exclusion. It reports qualified capital stock sales, extraordinary dividends, and capital gains exclusions deferred from a prior year or to the next year. Att
Who files this form
Use 2024 Form 4797N to make Nebraska’s special capital gains/extraordinary dividend election or claim an exclusion under an existing election.
- An eligible employee must be subject to income tax withholding and must have acquired the stock while employed by a qualified corporation or because of that employment.
- A spouse, descendant, or qualifying trust may claim an exclusion for qualifying stock received as a gift from the employee, subject to the form’s requirements. Inherited stock does not qualify.
- If the employee is living, only the employee may make the election. If the employee died without making it, a qualifying surviving spouse, or the oldest living descendant if there is no surviving spouse, may make it.
The exclusion applies to qualifying transactions by residents and by partial-year residents while they were residents. If you have a capital gains exclusion carryover, complete Form 4797N each consecutive year until the carryover is used.
What you'll need
Gather the items that apply to your election or exclusion:
- Form 1040N or Form 1041N, to which Form 4797N must be attached.
- A copy of the original Form 4797N election if an election was previously made.
- Federal Form 8949 and Federal Schedule D for stock sales. If neither Federal Form 8949 nor Form 6252 is attached, complete Part IV.
- Federal Schedule B and other federal documentation for an extraordinary dividend.
- The corporation’s name, a description of the stock or dividend transaction, employment dates, stock acquisition dates, and requested names and Social Security numbers.
- The previous year’s Form 4797N to determine any carryover.
Attach explanations if the corporation’s name differs from the election, the stock was acquired outside the employment period, or cash cost was not used as the stock’s basis.
How to file
Attach Form 4797N to Form 1040N or Form 1041N. The supplied text does not give a mailing address or e-file instructions.
Complete the parts that match your situation:
| Situation | Employee | Non-employee |
| --- | --- | --- |
| Claim an exclusion under an existing election | Page 1 | Part III and Page 1 |
| Make an election and claim an exclusion | Part I and Page 1 | Parts I, II, III, and Page 1 |
| Make an election without claiming an exclusion | Part I only | Parts I and II only |
Sign and date Part I when making an election. Complete Part IV if neither Federal Form 8949 nor Form 6252 is attached.
Enter the allowable exclusion from line 12 on Form 1040N, Nebraska Schedule I, line 16, or Form 1041N, line 5. If a trust is claiming the exclusion, contact the Nebraska Department of Revenue for specific instructions.
Common mistakes
- Making a second election: Only one election is allowed for an employee. Once made, it cannot be changed.
- Claiming inherited stock: Stock inherited or transferred because of the employee’s death does not qualify.
- Counting sale expenses twice: Do not include commissions and option premiums on line 2 if they were already deducted from the sales price reported on line 1.
- Exceeding the line 6 limit: Line 6 cannot be less than zero or greater than Nebraska taxable income on Form 1040N, line 14, calculated without the exclusion.
- Including a return of capital as a dividend: Line 10 must not include any distribution, or portion of a distribution, that is not treated as a dividend on the federal return.
- Putting the exclusion on the wrong schedule: Partial-year residents must not include the line 12 amount on Form 1040N, Nebraska Schedule III, line 1.
Questions people ask
Can I make the election without selling stock or receiving a dividend?
Yes. The election may be made even if there is no stock sale or exchange and no extraordinary dividend is received.
Can spouses make separate elections?
Yes. Each spouse may make their own election, and the elections may be for different corporations.
What counts as an extraordinary dividend?
The dividend must be more than 20% of the fair market value of the related stock on the date the dividend is declared. A dividend equal to 20% does not qualify.
Do I need a separate Page 1 for every stock sale?
Combine multiple sales of stock from one employee on a single Page 1. For stock from more than one employee, complete a separate Page 1 through line 3 for each employee’s stock, then consolidate lines 4 through 8 on one Page 1. Each additional extraordinary dividend requires a separate Page 1.
Do stock options qualify?
Stock options are not capital stock, and gains from selling or exercising an option are not eligible for the exclusion. Stock acquired by exercising an option without additional payment, when the option was granted as compensation, is considered acquired on account of employment.