4797N: Special Capital Gains Election and Computation (2025)
Nebraska · Nebraska DOR · Used for tax years 2025
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 2025 Form 4797N to make Nebraska’s special capital gains/extraordinary dividend election, claim an exclusion under an existing election, or compute a capital gains exclusion carryover.
An eligible employee is someone subject to income tax withholding who is or was employed by a qualified corporation and acquired its stock while employed or because of that employment. Qualifying transactions by residents, or by partial-year residents while they are residents, may receive the exclusion.
- The corporation must have existed and actively done business in Nebraska for at least three years before the first qualifying sale, exchange, or dividend declaration. Ownership requirements also apply. Publicly traded corporations meet those ownership requirements.
- A spouse, descendant, or qualifying trust may claim an exclusion for qualifying stock received as a gift from the employee. Inherited stock does not qualify.
- If the employee is living, only the employee can make the election. If the employee died without making it, the surviving spouse, or the oldest living descendant if there is no surviving spouse, may qualify to make it.
- Form 4797N must be completed each consecutive year until a prior-year capital gains carryover has been used.
What you'll need
Have the following information and attachments ready, as applicable:
- Your Nebraska return: Form 1040N or Form 1041N, including the name and Social Security number shown on the return.
- Stock sale documents: Federal Form 8949 and Federal Schedule D. If Form 8949 is not attached, complete Part IV or attach Federal Form 6252.
- Dividend documents: Federal Schedule B and other federal documentation for the dividend. You also need the dividend amount and the fair market value of all stock you owned in the company on the declaration date.
- An earlier election: Attach a copy of the Form 4797N on which the initial election was made if an election already exists.
- Stock and employment details: The corporation’s name, a description of the stock or dividend transaction, the employee’s employment dates, and the dates the employee acquired the stock.
- Required explanations: Explain how stock acquired outside the employment period was acquired because of employment. If the corporation’s name differs from the election, explain the relationship and why the income qualifies. If cash cost was not used as the stock’s basis, attach an explanation of the basis.
- Carryover information: Use the previous year’s Form 4797N to find any capital gains exclusion deferred from that year.
How to file
Attach Page 1 of Form 4797N to Form 1040N or Form 1041N when claiming the exclusion. Complete the parts that match your situation:
| Situation | Employee | Someone other than the 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 Federal Form 6252 is attached.
Enter the allowable exclusion from line 12 on Form 1040N, Nebraska Schedule I, line 19, or Form 1041N, line 5.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Making a second election: Only one election is allowed for an employee. Once made, it cannot be changed. Do not complete Part I if an election already exists for that employee.
- Claiming inherited stock: Stock inherited or transferred because of the employee’s death does not qualify.
- Double-counting selling expenses: If line 1 uses the net sales price after commissions and option premiums, do not also include those expenses on line 2.
- Ignoring qualifying stock losses: Net losses against gains on qualifying stock when calculating line 3. Line 3 cannot exceed the amount included in calculating federal adjusted gross income.
- Exceeding the line 6 limits: Line 6 cannot be below zero or above Nebraska taxable income on Form 1040N, line 14, without the exclusion.
- Including a return of capital as a dividend: Do not include distributions, or portions of distributions, that are not treated as dividends on the federal return.
- Putting the exclusion on the wrong schedule: Partial-year residents must not include the line 12 exclusion 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. An employee completes only Part I; a qualifying non-employee completes Parts I and II.
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. If the percentage is exactly 20% or less, enter zero on line 11b.
Can spouses each make an election?
Yes. Each spouse may make their own election, and they may choose different corporations.
How do I report multiple stock sales or extraordinary dividends?
Combine 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, then consolidate lines 4 through 8 on one Page 1. Complete a separate Page 1 for each additional extraordinary dividend and calculate each dividend’s percentage separately.
Who can help if a trust is claiming the exclusion?
The form directs trusts claiming the exclusion to contact the Nebraska Department of Revenue for specific instructions. The listed numbers are 800-742-7474 for Nebraska and Iowa, and 402-471-5729.