Sale of Business Property

Form 4797 is used to report the sale of business property and other depreciable and amortizable property. On part I are reported losses on property held for more than one year, which recieve ordinary loss treatment. On part II are reported sales for property held for one year or less and on Part III property sold held for more than one year for which depreciation is a taxable component. Part IV included recapture of depreciation and amortization under Section 179 and Section 280F when business use declines below 50%.

IRC Section 1231 provides the best of both worlds on the sale of business assets and residential property. If cumulative Section 1231 losses have exceeded Section 1231 gains from the prior 5 years then the difference is treated as ordinary income.