Form 1040 Schedule D-1: Continuation Sheet for Schedule D (2010)
What Form 1040 Schedule D-1 Is For
Schedule D-1 is a supplemental form that works hand-in-hand with Schedule D (Capital Gains and Losses) on your Form 1040 tax return. Think of it as an overflow sheet when you run out of room on Schedule D itself. The main Schedule D form provides space for only five transactions in each of its two main sections—one for short-term capital gains and losses (assets held one year or less) and another for long-term capital gains and losses (assets held more than one year). When you have more than five transactions in either category, you need Schedule D-1 to list the additional sales or exchanges of capital assets.
Capital assets include investments like stocks, bonds, mutual fund shares, real estate that isn't your primary residence, and other property held for investment purposes. Every time you sell one of these assets, you must report the transaction to the IRS. For active investors who make numerous trades throughout the year, the limited space on Schedule D fills up quickly, making Schedule D-1 essential for complete reporting.
The form captures the same information as Schedule D: a description of each property sold, the dates you acquired and sold it, the sales price, your cost basis, and the resulting gain or loss. You then total everything from your Schedule D-1 forms and transfer those combined totals back to Schedule D, which ultimately flows to your main Form 1040.
When You'd Use Form 1040 Schedule D-1 (Including Late or Amended Returns)
You must use Schedule D-1 whenever you have more than five transactions to report on line 1 (short-term gains and losses) or more than five transactions on line 8 (long-term gains and losses) of Schedule D. This is not optional—the IRS requires detailed reporting of each individual transaction. You cannot simply provide summary totals or aggregate information by brokerage account; every sale must be itemized.
For your original 2010 tax return, Schedule D-1 would have been attached along with Schedule D when you filed by the April deadline (or October if you filed for an extension). The form is equally important for amended returns. If you discover errors in your capital gains reporting after filing—perhaps you forgot to report certain sales, miscalculated your basis, or received corrected information from your broker—you would file Form 1040X (Amended U.S. Individual Income Tax Return) and include corrected Schedule D and Schedule D-1 forms showing all transactions accurately.
Late filers who missed the original filing deadline would also attach Schedule D-1 when submitting their delinquent 2010 return. Even though filing deadlines have long passed for tax year 2010, taxpayers can still file returns for prior years to claim refunds (typically within three years of the original due date) or to satisfy filing requirements, and proper documentation of all capital transactions remains mandatory.
If you elected to e-file your return but chose not to include your detailed transaction records electronically, you were required to attach Schedule D-1 (or equivalent statements) to Form 8453 and mail it separately to the IRS. This ensured the agency received complete records even when the electronic submission contained only summary information.
Key Rules or Details for 2010
Several important rules govern the use of Schedule D-1. First, each transaction must be reported on a separate line—no combining multiple sales into summary entries. The IRS explicitly prohibits entering statements like ""available upon request"" along with total figures instead of providing full details. This line-by-line reporting requirement ensures transparency and helps the IRS verify that you're accurately reporting all your investment income.
Second, you can use multiple copies of Schedule D-1 if needed. There's no limit to how many continuation sheets you can attach to your return. If you're a particularly active trader with dozens or hundreds of transactions, you would fill out as many Schedule D-1 forms as necessary to list everything.
Third, while Schedule D-1 is the official IRS form, you're also allowed to create your own attached statement containing the same information in a similar format. Some tax software programs and professional tax preparers generate custom schedules that include all the required data points. As long as your statement contains the equivalent information in a clear, organized format that mirrors the Schedule D-1 layout, the IRS accepts it.
Fourth, proper classification matters: short-term versus long-term treatment depends on your holding period. You begin counting the day after you acquired the property and include the day you sold it. If the period is one year or less, it's short-term (reported on line 1 area of Schedule D-1). If it's more than one year, it's long-term (reported on line 8 area). This distinction significantly affects your tax liability, as long-term capital gains generally receive more favorable tax rates.
Finally, you must report transactions even when they result in non-deductible losses. For example, if you sold a vacation home (not your main residence) at a loss, that loss isn't deductible on your tax return, but if you received a Form 1099-S reporting the transaction, you still need to show it on Schedule D-1 with a zero entered in the gain/loss column.
Step-by-Step (High Level)
Start by gathering all your documentation: Forms 1099-B from brokers, Forms 1099-S for real estate transactions, and your own records showing when and how you acquired each property. You'll need to calculate your cost basis for each asset, which typically includes the original purchase price plus any commissions or fees you paid to acquire it.
At the top of Schedule D-1, fill in your name and Social Security number, matching what appears on your Form 1040. The form has two main sections that mirror Schedule D: Part I for short-term transactions (assets held one year or less) and Part II for long-term transactions (assets held more than one year).
For each transaction in the short-term section, work across the columns from left to right. In column (a), provide a brief description of the property—typically the name of the stock, the number of shares, and any other identifying information. In column (b), enter the date you acquired the property in month/day/year format. In column (c), enter the date you sold it. Column (d) is for the sales price—the amount you received from the sale, typically shown on your Form 1099-B. Column (e) requires your cost basis—what you paid for the property, including purchase commissions. Finally, in column (f), calculate your gain or loss by subtracting column (e) from column (d). Gains are positive numbers; losses are shown in parentheses or with a minus sign.
Repeat this process for every short-term transaction beyond the first five (which you reported directly on Schedule D). When you've listed all your short-term transactions across all your Schedule D-1 forms, total the amounts in column (d) and column (f). These totals get transferred to Schedule D, line 2.
The process for Part II (long-term transactions) is identical, except you're reporting transactions where you held the property more than one year. After listing all long-term transactions beyond the first five reported on Schedule D line 8, total columns (d) and (f) from the long-term section. Transfer these totals to Schedule D, line 9.
Attach all completed Schedule D-1 forms to your tax return behind Schedule D. The IRS will use the detailed information you provided to verify the totals on Schedule D and ensure you've properly reported all capital gains and losses for the year.
Common Mistakes and How to Avoid Them
One of the most frequent errors is misclassifying transactions as short-term when they're actually long-term, or vice versa. This happens when taxpayers miscalculate the holding period. Remember, count from the day after acquisition through and including the sale date. If you bought stock on May 15, 2009, and sold it on May 15, 2010, that's exactly one year—making it short-term, not long-term. To avoid this mistake, carefully check your purchase and sale dates and count the days or months between them.
Another common mistake is reporting only broker-summary totals instead of itemizing each transaction. Some taxpayers mistakenly believe they can simply enter one line showing all their sales through a particular brokerage firm. This violates IRS requirements and will likely trigger a notice requesting the detailed information. To avoid this, list every single transaction separately, even if it means filling out multiple Schedule D-1 forms.
Calculating cost basis incorrectly causes significant problems. Many taxpayers forget to include the commission they paid when buying the stock, which increases their basis and reduces their taxable gain. Others fail to adjust basis for stock splits, reinvested dividends, or return of capital distributions. Keep thorough records throughout the year, and when in doubt, contact your broker for help determining the correct cost basis.
Failing to report non-deductible losses is another oversight. Some taxpayers omit transactions that resulted in losses they cannot deduct (such as sales of vacation properties), not realizing the IRS still requires reporting them when a Form 1099-S was issued. If you received an information return about a transaction, report it on Schedule D-1 even if the loss isn't deductible—just enter zero in the gain/loss column.
Wash sale errors are particularly tricky. A wash sale occurs when you sell securities at a loss and purchase substantially identical securities within 30 days before or after the sale. The loss isn't currently deductible; instead, it's added to the basis of the replacement securities. Taxpayers sometimes deduct the full loss without accounting for the wash sale rules. Your broker should identify wash sales on your Form 1099-B, but if you trade the same security across multiple brokerage accounts, you're responsible for identifying wash sales yourself. Report the transaction on Schedule D-1, enter the full loss in column (f), then on the line directly below, write ""Wash Sale"" in column (a) and enter the disallowed loss amount as a positive number in column (f).
Finally, forgetting to carry totals from Schedule D-1 to Schedule D is surprisingly common. After meticulously completing all your continuation sheets, some taxpayers submit their returns without transferring the combined totals to lines 2 and 9 of Schedule D. This makes the return incomplete and can delay processing. Always double-check that the totals from all your Schedule D-1 forms have been properly entered on Schedule D.
What Happens After You File
Once you submit your return with Schedule D-1 attached, the IRS processes your capital gains information as part of their overall review of your tax return. The agency uses sophisticated computer systems to match the transactions you reported with the Forms 1099-B and 1099-S that brokers and settlement agents sent directly to the IRS. This matching process helps identify unreported income or discrepancies in reported amounts.
If everything matches and your calculations are correct, your return processes normally. The capital gains and losses you reported flow through Schedule D to your Form 1040, affecting your total tax liability. Your short-term capital gains are taxed as ordinary income at your regular tax rate, while long-term capital gains generally receive preferential tax rates (typically 0%, 15%, or 20%, depending on your income level for 2010).
If the IRS identifies discrepancies, you'll receive a notice—typically a CP2000 (Underreporter Inquiry) if they believe you failed to report income shown on information returns, or a math error notice if your calculations don't add up correctly. These notices give you an opportunity to respond, providing either additional documentation to support your original reporting or agreeing to the changes and paying any additional tax owed.
When you've reported capital losses, the IRS verifies that you've properly limited your deduction. For 2010, you could deduct capital losses up to the amount of your capital gains plus $3,000 (or $1,500 if married filing separately). Losses exceeding this limit carry forward to future years. The IRS tracks these carryovers through their computer systems, though you're responsible for maintaining your own records and calculating the carryover amounts on your subsequent returns.
In some cases, the IRS may select your return for audit, particularly if you reported significant gains or losses or if your trading patterns appear unusual. An audit might involve correspondence (requesting documentation by mail) or an in-person meeting with an IRS examiner. If audited, you'll need to provide documentation supporting each transaction—including purchase confirmations, sale confirmations, and records showing how you calculated cost basis.
The information you reported on your 2010 Schedule D-1 may also affect future tax years. If you reported losses that exceeded the annual deduction limit, you'll carry those losses forward on future Schedule D forms. Similarly, if you made elections related to qualified small business stock or installment sales, those decisions have multi-year implications. Keep your 2010 tax return and all supporting Schedule D-1 documentation for at least three years after filing (longer if you had large loss carryovers or reported certain types of transactions).
FAQs
Can I attach my own statement instead of using the official Schedule D-1 form?
Yes, the IRS allows you to create your own attached statement as long as it contains all the same information required on Schedule D-1 and follows a similar format. Many tax software programs automatically generate these statements. Your custom statement must include descriptions of property, dates acquired and sold, sales prices, cost basis, and gains or losses for each transaction. Just ensure the totals from your statement are properly carried over to lines 2 and 9 of Schedule D.
What if I make a mistake on Schedule D-1 after I've already filed?
File an amended return using Form 1040X. Attach corrected Schedule D and Schedule D-1 forms showing all transactions with accurate information. In the explanation section of Form 1040X, briefly describe what you're correcting—for example, ""Correcting cost basis on stock sales"" or ""Adding previously omitted transactions."" You generally have three years from the original filing deadline to amend a return and claim a refund.
Do I need to file Schedule D-1 if I only have six transactions—three short-term and three long-term?
No. Schedule D provides space for five transactions each in the short-term section (lines 1) and long-term section (line 8). Since you have only three of each type, all your transactions fit directly on Schedule D itself without needing any continuation sheets. You only need Schedule D-1 when you exceed five transactions in either category.
My broker sent me a substitute statement showing all my transactions. Is that the same as Schedule D-1?
Not quite. Your broker's substitute statement fulfills the IRS requirement for the broker to provide you with transaction details, but it's not a substitute for filing Schedule D-1 with your tax return. You still need to transfer the information from the broker's statement onto Schedule D and Schedule D-1 (or create your own equivalent statement) when you file your return. The IRS needs the information in the specific format that matches their processing systems.
What happens if I have hundreds of transactions? Do I really need to list every single one?
Yes, the IRS requires detailed reporting of each individual transaction—no matter how many you have. Taxpayers with hundreds of transactions often use tax software that can import data directly from brokerage accounts and automatically generate the necessary Schedule D-1 forms or equivalent statements. If you're preparing a paper return with hundreds of transactions, you can create your own typed or computer-generated statements following the Schedule D-1 format. Some professional tax preparers also have specialized software for active traders.
If I sell stock at a loss in December and buy it back in January, can I deduct the loss?
It depends on the timing. If you repurchase substantially identical stock within 30 days after the sale, the wash sale rules apply and you cannot currently deduct the loss. The disallowed loss gets added to the basis of the replacement stock. However, if you wait more than 30 days after the sale before repurchasing, the wash sale rules don't apply and you can deduct the loss (subject to the overall capital loss limitations). Report wash sales on Schedule D-1 by showing the full loss, then entering an adjustment on the following line.
I inherited stock from my grandmother who passed away in 2010. How do I report this on Schedule D-1?
Special rules apply to property acquired from someone who died in 2010. The basis and holding period rules changed for that year, so you should consult IRS Publication 4895 for specific guidance. Generally, when you eventually sell inherited property, you'll report the transaction on Schedule D or Schedule D-1 just like any other sale. However, the basis and holding period calculations may differ from typical transactions, so it's important to determine these figures correctly before completing the form.
Note: This summary is based on the 2010 version of Schedule D-1 and related instructions. Tax forms and requirements change over time, so this information specifically applies to tax year 2010. For current year filings, always refer to the most recent IRS forms and instructions available at IRS.gov.
