561-S: 2025 Form 561-S Oklahoma Capital Gain Deduction for the Nonresident Shareholder Whose Income is Reported on Form 512-S Part 1 (2025)
Oklahoma · Oklahoma Tax Commission · Used for tax years 2025
Oklahoma Form 561-S calculates the capital gain deduction for a nonresident 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 determines the deduction entered on the S corporation’s r
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, and who did not file a nonresident shareholder agreement, Form 512-SA. Complete a separate Form 561-S for each such shareholder.
The deduction applies to qualifying capital gains included in federal income. Eligible sales include:
- Real or tangible personal property in Oklahoma held for at least five uninterrupted years.
- Stock or an ownership interest in an Oklahoma company, limited liability company, or partnership held for at least three uninterrupted years, or two years for individuals.
- Qualifying property sold as part of the sale of all or substantially all of an Oklahoma entity’s assets, subject to the stated ownership and use requirements of at least three uninterrupted years, or two years for individuals.
For property held through a pass-through entity, both the shareholder’s membership and the entity’s ownership of the asset must meet the applicable holding period. An Oklahoma company, limited liability company, or partnership must have had its primary headquarters in Oklahoma for at least three uninterrupted years before the sale.
What you'll need
The form asks you to provide:
- Federal Form 1120-S, 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 employer identification number, and the dates the shareholder acquired ownership in the S corporation.
For each listed sale, gather the property description, Oklahoma location or applicable entity federal identification number, acquisition and sale dates, proceeds, adjusted basis information, and the shareholder’s gain or loss allocated or apportioned to Oklahoma. A pass-through entity must provide supplemental information identifying qualifying capital gains passed through to its members.
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 an electing pass-through entity’s election. Do not enter those amounts on Form 561-S. They belong on the entity’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 on line 1 amounts reported on lines 2 and 3.
- 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 cannot be less than zero.
Questions people ask
How much is the deduction?
Line 6 is the smaller of line 4, the qualifying Oklahoma net capital gain, or line 5, the shareholder’s share of net capital gain allocated or apportioned to Oklahoma. The deduction cannot be less than zero.
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 ownership of the property and the shareholder’s ownership in the corporation must have met the applicable holding period as of the sale date. Provide Federal Form 6252.
What does “net capital gain” mean for line 5?
It is the excess of net long-term capital gain over net short-term capital loss for the taxable year. Enter the shareholder’s share allocated or apportioned to Oklahoma. If there is a net capital loss, enter zero.
Which property type code should I enter?
Use 1 for qualified Oklahoma corporation stock, 2 for an ownership interest in a qualified Oklahoma company, limited liability company, or partnership, 3 for qualified Oklahoma real property, and 4 for qualified Oklahoma tangible personal property. Use 5 for qualified Oklahoma intangible property sold as part of a sale of all or substantially all of an Oklahoma entity’s assets. On lines 2 and 3, use 99 if the net gain or loss comes from more than one property type.