Form 4797, Sales of Business Property is used to report the following transactions:
- The sale or exchange of:
- Property used in a trade or business
- Depreciable and amortizable property
- Oil, gas, geothermal, or other mineral properties
- Section 126 property
- The involuntary conversion (from other than casualty or theft) of property used in a trade or business and capital assets held in connection with trade or business or a transaction entered into for profit.
- The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of a trade or business).
- The disposition of capital assets not reported on Schedule D.
- The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations.
- The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less.
If an asset is sold or otherwise disposed of, you need to determine if you will enter the sale information directly on Form 4797 or on another form. Report the sale directly on Form 4797 except in these scenarios:
- Installment sale - Report an installment sale on Form 6252 unless the taxpayer elects out of reporting it as an installment sale and instead wishes to recognize the entire gain in the year of the sale.
- Like-kind exchange - Report a like-kind exchange of real property on Form 8824.
- Casualty or theft - Report an involuntary disposition due to casualty or theft on Form 4684. Note that for tax years 2018-2025 only a casualty or theft loss attributable to a federally declared disaster can be deducted. (Involuntary disposition not due to casualty or theft is reported on Form 4797.)
When the disposition is reported on Form 4684, 6252, or 8824 as appropriate, the gain or loss on the disposition flows to Form 4797 from the other form.
You also need to determine the amount of depreciation to recapture. Knowing the amount of depreciation to recapture is important for the purpose of determining the asset's adjusted basis, and for a like-kind exchange for determining the ordinary gain or loss. It's also an important amount when selling property under the installment method, because any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale.
Step 1: Indicate the date of disposition.
If the asset's depreciation is being calculated in the business form in ProWeb, you'll need to enter the asset's date of disposition in its asset record. From the depreciation section of the business:
- Locate the asset being disposed of in the Depreciation Asset menu and select the blue pencil icon to edit it.
- Near the bottom of the window enter the date of disposition, then click the blue CONTINUE button.
Step 2: Determine the amount of depreciation to recapture
If the asset's depreciation is being calculated in the business form in ProWeb, print the return and examine the asset's line in the statement of depreciation. For the asset that has been disposed of, the sum of the accumulated depreciation plus the current year's depreciation equals the amount of depreciation allowed that will be recaptured.
If depreciation is being calculated outside of TaxSlayer Pro, you'll need to look at those records to determine the total depreciation allowed that will need to be recaptured.
Step 3: Enter the sale on Form 4797
From the Federal Section select:
- Income
- Other Income
- Sale of Business Property
-
Add or Edit 4797 Transactions - If this isn't the first entry in this form,
click the blue + Add a Sale of Business Property button. - Enter information about the disposition:
- If filing MFJ, to whom the form belongs.
- Description of Property
- Date Acquired - Enter the date acquired
- Date Sold - Enter the date sold
- Sales Price
- Depreciation Allowed - Enter the amount of depreciation taken.
- Cost or Other Basis
- Transaction Type - See the chart below to help determine which part of the form the transaction will be reported in. (See here for a fuller explanation of Section 1245.)
Type of Property | Held 1 year or less |
Held more than 1 year |
||
1 | Depreciable tangible trade or business property: | |||
a | Sold or exchanged at a gain | Part II | Part III (1245) | |
b | Sold or exchanged at a loss | Part II | Part I | |
2 | Depreciable real trade or business property property: | |||
a | Sold or exchanged at a gain | Part II | Part III (1250) | |
b | Sold or exchanged at a loss | Part II | Part I | |
3 | Farmland held less than 10 years upon which soil or water expenses were deducted | |||
a | Sold at a gain | Part II | Part III (1252) | |
b | Sold at a loss | Part II | Part I | |
4 | Real or tangible trade or business property which was deducted under the de minimis safe harbor | Part II | Part II | |
5 | All other farmland used in a trade or business | Part II | Part I | |
6 | Disposition of cost-sharing payment property described in section 126: | Part II | Part III (1255) | |
7 | Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes | Held less than 24 months |
Held 24 months or more |
|
a | Sold at a gain | Part II | Part III (1245) | |
a | Sold at a loss | Part II | Part I | |
c | Raised cattle and horses sold at a gain | Part II | Part I | |
8 | Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes | Held less than 12 months |
Held 12 months or more |
|
a | Sold at a gain | Part II | Part III (1245) | |
b | Sold at a loss | Part II | Part I | |
c | Raised livestock sold at a gain | Part II | Part I | |
9 | Oil, gas, or geothermal property | Part III (1254) |
Note: This is a brief guide on entering information into Form 4797 in TaxSlayer ProWeb. This is not intended as tax advice.
Additional Information:
IRS: Instructions for Form 4797 - Sale of Business Property
IRS: Publication 537 - Installment Sales