Use Form 4797 to report gain or loss from a sale, exchange, or involuntary conversion of property used in your trade or business or held for the production of rents or royalties. Form 4797 can be used with Form 1040, 1065, 1120, or 1120S.

Section 1231 gains and losses. Any section 1231 gains and losses are shown in Part I. A net gain is carried to Schedule D (Form 1040) as a long-term capital gain. A net loss is carried to Part II of Form 4797 as an ordinary loss.

If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. Any remaining gain is reported on Schedule D (Form 1040). See Section 1231 Gains and Losses in chapter 3.

Ordinary gains and losses. Any ordinary gains and losses are shown in Part II. This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. It also includes ordinary gain figured in Part III.

Ordinary income from depreciation. The ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) is figured in Part III. The ordinary income is carried to Part II of Form 4797 as an ordinary gain. Any remaining gain is carried to Part I as section 1231 gain, unless it is from a casualty or theft. Any remaining gain from a casualty or theft is carried to Form 4684.

Previous | First | Next

Publication Index | 2000 Tax Help Archives | Tax Help Archives | Home