Gains or losses from sales, exchanges, involuntary conversions and other dispositions of business property, other than merchandise or products sold in the normal course of business, are generally reported on Form 4797. This property may be subject to the provisions of section 1231 of the Internal Revenue Code, which defines whether these gains or losses are treated as ordinary or capital. And it may be necessary to recapture depreciation or amortization and report part or all of a gain on certain assets as ordinary income.
Form 4797
Form 4797 can be used by individuals, sole proprietorships, partnerships, corporations, and S-corporations to report gains and losses from sales, exchanges, and involuntary conversions of depreciable and amortizable property used in a trade or business. There are certain transactions that must be reported on other forms first, and the results from these other forms are then transferred and included on Form 4797. These include:
Form 4684, Casualties and Thefts, to report involuntary conversions from casualties or thefts of business property.
Form 6252, Installment Sale Income, to report income from installment sales of business property.
Form 8824, Like-Kind Exchanges, to report the exchange of property used in a business or held for investment, for property of a like kind.
Form 4255, Recapture of Investment Credit, if you sold property on which you had taken an investment credit.
Form 8594, Asset Acquisition Statement, when you sell a group of assets that makes up a trade or business.