561-S: 2024 Form 561-S Oklahoma Capital Gain Deduction for the Nonresident Shareholder Whose Income is Reported on Form 512-S Part 1 (2024)
Oklahoma · Oklahoma Tax Commission · Used for tax years 2024
Oklahoma Form 561-S calculates the capital gain deduction for a nonresident S corporation shareholder whose income is reported on Form 512-S, Part 1. It reports the shareholder’s share of qualifying Oklahoma capital gains and losses and the deduction carried to Form 512-S.
Who files this form
Form 561-S is used to figure the Oklahoma capital gain deduction for a nonresident shareholder whose income is reported on Form 512-S, Part 1. These are shareholders who did not file a nonresident shareholder agreement, Form 512-SA.
Complete a separate Form 561-S for each nonresident shareholder. The deduction applies to qualifying gains included in federal income, subject to the applicable property and ownership holding periods.
What you'll need
The form asks you to provide:
- Federal Form 1120S, Schedule D and Form(s) 8949.
- Form(s) 1099-B if a qualifying gain or loss is reported on Federal Schedule D, line 8a.
- Federal Form 6252 for qualifying installment sales reported on line 2.
- Federal Form 8824 for qualifying like-kind exchanges reported on line 3.
You will also need the shareholder’s name and tax identification number, the corporation’s name and federal identification number, and the dates the shareholder acquired ownership in the S corporation.
For qualifying property, gather its description, Oklahoma location or the relevant entity’s federal identification number, acquisition and sale dates, proceeds, cost or other basis and adjustments, and the shareholder’s gain or loss allocated or apportioned to Oklahoma. A pass-through entity must provide its member with supplemental information identifying qualifying capital gains passed through to the member.
Common mistakes
- Combining shareholders on one form. Complete a separate Form 561-S for each nonresident shareholder whose income is reported on Form 512-S, Part 1. Enter the total from all Forms 561-S on Form 512-S, Part 1, line 1b.
- Including gains or losses covered by a pass-through entity election. If you are a direct or indirect member of an electing PTE, do not include the gain or loss covered by that election on Form 561-S. It belongs on the PTE’s Form 561-PTE.
- Including more than the Oklahoma portion. If less than 100% of a gain or loss is apportioned to Oklahoma, include only that portion in column F.
- Counting the same gain or loss twice. Do not include amounts reported on lines 2 and 3 again on line 1.
- Entering negative amounts where zero is required. Enter zero on line 4 if the result is zero or less, and on line 5 if there is a net capital loss. Line 6 is the smaller of lines 4 and 5 and cannot be less than zero.
Questions people ask
What holding periods apply to qualifying gains?
Oklahoma real or tangible personal property must have been owned for at least five uninterrupted years before the sale. Qualifying stock or ownership interests require at least three uninterrupted years, or two for individuals. The three-year period, or two for individuals, also applies to qualifying property sold as part of a sale of all or substantially all of an Oklahoma entity’s assets, subject to the ownership and use requirements printed on the form. For pass-through gains, both the member and the entity must meet the applicable holding periods.
What makes a company an Oklahoma company for this deduction?
Its primary headquarters must have been located in Oklahoma for at least three uninterrupted years before the sale. This definition also applies to limited liability companies and partnerships.
Can an installment sale qualify?
Yes. Use the shareholder’s share of the current year’s taxable portion of the installment payment allocated or apportioned to Oklahoma. Both the S corporation’s property holding period and the shareholder’s ownership holding period must have been met as of the sale date. Provide Federal Form 6252.
Is there a limit on the deduction?
Yes. Line 6 is the smaller of the qualifying Oklahoma net capital gain on line 4 or the shareholder’s share of net capital gain allocated or apportioned to Oklahoma on line 5. For line 5, net capital gain means net long-term capital gain minus net short-term capital loss. The deduction cannot be less than zero.