Client recently moved to AZ and has Section 1231 gains passing through from several real estate partnerships, which will end up on Sch D and taxed as capital gains.   For the  25% AZ capital gain exclusion, Lacerte only picks up the Sch D capital gains for assets acquired after 12/31/11, which is the disposition screen input.  Are Section 1231 gains passing out of a partnership eligible for the 25% AZ gain exclusion?    The AZ statutes and regulations do not address the issue.     If they do qualify, how do you accomplish the Lacerte input.   It appears that 1231 gains qualify because if they are entered the gain through the disposition screen and trigger the Form 4797, then the 25% gain exclusion is triggered.    Rather than input the Section 1231 gain on the K-1 input one could move the gain to the 4797 input using the disposition screen and title the gain as "K-1 Passthrough ABC LLC", which would trigger the 25% deduction.   Frustrating not being able to get an answer to a simple question.   Called and emailed AZ two weeks and no response and they are not answering phones.