I am an Oklahoma Resident. TurboTax is transferring all of my long-term capital gains to Form 561 which is for the sale of stock in an Oklahoma Corp. How do I fix this?

[rdbishop]

The instructions for the form state "Enter the qualifying Oklahoma net capital gain, reported on Federal Schedule D, from the Federal Form 4797. Provide a copy of
the Federal Form 4797. If reporting a gain/loss from a Federal Schedule K-1, complete the worksheet on page 2 and provide a copy of
the Federal Schedule K-1."  

The fact that TurboTax is requesting me to fill out page 2 of the form clearly indicates to me that this is a bug since this gain was not reported on Federal Schedule K-1.  The form only requires page 2 if the gain comes form Federal Schedule K-1.

[rdbishop]

I beg to differ with you:

1. The sale of real or tangible personal property located within Oklahoma that has been owned for at least five
uninterrupted years prior to the date of the transaction that gave rise to the capital gain;

[rdbishop]

I believe I have found a work around for this bug.  Go to Forms view and select page 2 of Form 561.  Once you have page 2 of Form 561 active, click on Edit in the menu and select "Delete Table Row".  This has the effect of deleting page 2 of the form and TurboTax no longer reports the error.  Hope this helps.  I was about to switch to filing state by mailing the forms and excluding page 2 of form 561 but this workaround seems to do the trick.

[RyanK]

This is still an issue in the 2022 Desktop software. Turbo Tax has erroneously pulled the first 5 entries from my 1099-B (direct download from Interactive Brokers) and placed them on form 561. Why are these showing up here? How can they be removed? Why is it only the first 5 entries from my 1099?

[Alarue51]

I found a fix for this issue! You have to go back the beginning of your Oklahoma return, and proceed until you hit 'Oklahoma Capital Gains Exemptions'. Listed are all of the transactions that TurboTax automatically flagged. Unfortunately, the only way to fix it is to go transaction by transaction and select the box for 'not exempt'. Some still ask for dates, I just put the first of 2022. This isn't perfect, but they're not being looked at for the exemption anyway, and it got me past the flag, and allowed me to file. Good luck!

[RyanK]

Thanks for responding, but your work around will not work for me, and of course shouldn't be necessary to begin with. I actually deleted my Oklahoma return and started over. I am never given a screen regarding "Oklahoma Cap Gains Exemptions". In fact, i assume before i can get there, i get to a screen that asks about a loss on my federal k1. It wants to know how much of it relates to OK. Although, i put in ZERO, it will not allow me to advance to the next screen without choosing the type of Oklahoma property involved (drop down options 1 thru 5, or 99-other). But the loss IS NOT Oklahoma property so any response provided would be incorrect. Red letters pop up at the bottom saying i must choose an OKLAHOMA property type. And at the same time, also in bold red letters, it says i can just enter zero if none. The program is clearly broken. I have never had Turbo Tax force me to enter something before moving to the next screen.

[JulieS]

Yes, if you have any capital gains or losses and you file an Oklahoma return, you have to provide details of the transaction, or indicate that is does not qualify for the exclusion. 

In the case with a pass through entity, the solution is to select 99 from the dropdown. The program will not apply the special treatment to your loss and there are no follow up questions.