Some more info - it does flow to Sched D line 19 (it is an unrecaptured section 1250 gain) and to the appropriate lines on Sched D tax. This results in it being subtracted from the capital gains taxed at lower than 25%, but it was never included in them in the first place (as it should have been if was correctly added to line 12 Sched. D). It is correctly characterized on the K1-additional information form.
