Form 4797: Sales of Business Property, Parts I–IV and Section 1231, 1245 and 1250

“Use Form 4797 to report:
The sale or exchange of property.
The involuntary conversion of property and capital assets.
The disposition of noncapital assets.
The disposition of capital assets not reported on Schedule D.”

“Use Form 4797 to report the following.
The sale or exchange of:
Real property used in your trade or business;
Depreciable and amortizable tangible property used in your trade or business (however, see Disposition of Depreciable Property Not Used in Trade or Business, later);
Oil, gas, geothermal, or other mineral properties; and
Certain cost-sharing payment property under section 126.”

“The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held for more than 1 year in connection with a trade or business or a transaction entered into for profit (however, see Disposition of Depreciable Property Not Used in Trade or Business, later).
[…]”

“Use Part I to report section 1231 transactions that are not required to be reported in Part III.”

“Use Part III to figure recapture of depreciation and other items that must be reported as ordinary income on the disposition of certain property. Complete lines 19 through 24 to determine the gain on the disposition of the property. If you have more than four properties to report, use additional forms.”

“Generally, for property held 1 year or less, do not complete Part III; instead, use Part II. For exceptions, see the chart Where To Make First Entry for Certain Items Reported on This Form, earlier.”

“If you took a section 179 expense deduction for property placed in service after 1986 (other than listed property, as defined in section 280F(d)(4)) and the business use of the property decreased to 50% or less this year, complete column (a) of lines 33 through 35 to figure the recapture amount.”

“If you have listed property that you placed in service in a prior year and the business use decreased to 50% or less this year, figure the amount to be recaptured under section 280F(b)(2). Complete column (b), lines 33 through 35.”

“Subtract line 34 from line 33 and enter the recapture amount as “other income” on the same form or schedule on which you took the deduction. For example, if you took the deduction on Schedule C (Form 1040), report the recapture amount as other income on Schedule C (Form 1040).”

“Section 1231 transactions. The following are section 1231 transactions.
Sales or exchanges of real or depreciable property used in a trade or business and held for more than 1 year. To figure the holding period, begin counting on the day after you received the property and include the day you disposed of it.
Cutting of timber that the taxpayer elects to treat as a sale or exchange under section 631(a).
Disposal of timber with a retained economic interest that is treated as a sale, or an outright sale of timber, under section 631(b).
Disposal of coal (including lignite) or domestic iron ore with a retained economic interest that is treated as a sale under section 631(c).
Sales or exchanges of cattle and horses, regardless of age, used in a trade or business for draft, breeding, dairy, or sporting purposes and held for 24 months or more from acquisition date.
Sales or exchanges of livestock other than cattle and horses, regardless of age, used in a trade or business for draft, breeding, dairy, or sporting purposes and held for 12 months or more from acquisition date.
Note. Livestock does not include poultry, chickens, turkeys, pigeons, geese, other birds, fish, frogs, reptiles, etc.
Sales or exchanges of certain unharvested crops. See section 1231(b)(4).
Involuntary conversions of trade or business property or capital assets held more than 1 year in connection with a trade or business or a transaction entered into for profit. These conversions may result from (a) part or total destruction, (b) theft or seizure, or (c) requisition or condemnation (whether threatened or carried out). However, if any recognized losses were from involuntary conversions from fire, storm, shipwreck, or other casualty or from theft and the losses exceed the recognized gains from the conversions, do not include any gains or losses from such conversions when figuring your net section 1231 gains and section 1231 losses.”

“Transactions to which section 1231 does not apply. Section 1231 transactions do not include sales or exchanges of:
Inventory or property held primarily for sale to customers;
[…]”

“Section 1245 property. Section 1245 property is property that is depreciable (or amortizable or treated as amortizable under, for example, section 181, 185 (repealed), 197, or 1253(d)(2) or (3) (as in effect before the enactment of P.L. 103-66)) and is one of the following.
Personal property.
Elevators and escalators placed in service before 1987.
[…]”

“Section 1250 property. Section 1250 property is depreciable real property (other than section 1245 property). Generally, section 1250 recapture applies if you used an accelerated depreciation method or you claimed any special depreciation allowance, or the commercial revitalization deduction.”

“Generally, gain from the sale or exchange of depreciable property not used in a trade or business but held for investment or for use in a not-for-profit activity is capital gain. Generally, the gain is reported on Form 8949 and Schedule D. However, part of the gain on the sale or exchange of the depreciable property may have to be recaptured as ordinary income on Form 4797. Use Part III of Form 4797 to figure the amount of ordinary income recapture.”

“Use Form 8949, to report the sale or exchange of capital assets not reported on another form or schedule; gains from involuntary conversions (other than casualty or theft) of capital assets not used in your trade or business; and nonbusiness bad debts. However, see Disposition of Depreciable Property Not Used in Trade or Business, later.”

“Partners and S corporation shareholders receive a Schedule K-1 (Form 1065 or Form 1120-S), which includes amounts that must be reported on Form 4797.”