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                                                                                                                      Department of the Treasury
                                                                                                                      Internal Revenue Service
2023

Instructions for Form 4797

Sales of Business Property
(Also Involuntary Conversions and Recapture Amounts
Under Sections 179 and 280F(b)(2))

Section references are to the Internal Revenue Code                                     2. Depreciable and amortizable tangible property used 
unless otherwise noted.                                                             in your trade or business (however, see Disposition of 
                                                                                    Depreciable Property Not Used in Trade or Business, 
Future Developments                                                                 later);
                                                                                        3. Oil, gas, geothermal, or other mineral properties; 
For the latest information about developments related to                            and
Form 4797 and its instructions, such as legislation 
enacted after they were published, go to IRS.gov/                                       4. Section 126 property.
Form4797.                                                                           •   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 
General Instructions                                                                a trade or business or a transaction entered into for profit 
                                                                                    (however, see Disposition of Depreciable Property Not 
Purpose of Form                                                                     Used in Trade or Business, later).
Use Form 4797 to report the following.                                              •   The disposition of noncapital assets (other than 
• The sale or exchange of:                                                          inventory or property held primarily for sale to customers 
  1. Real property used in your trade or business;                                  in the ordinary course of your trade or business).

                                        Where To Make First Entry for Certain Items
                                                            Reported on This Form
                                                                                                                  (b)             (c)
                                              (a)                                                          Held 1 year            Held more
                                   Type of property                                                               or less         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:
    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 
                                                                                                          Part II         Part II
    de minimis safe harbor
  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                          Held less       Held 24 
    sporting purposes:                                                                                    than 24         months
                                                                                                          months          or more
    a   Sold at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  Part II         Part III (1245)
    b   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,                         Held less       Held 12 
    breeding, dairy, or sporting purposes:                                                                than 12         months
                                                                                                          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

Jan 9, 2024                                                           Cat. No. 13087T

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• The disposition of capital assets not reported on amount realized between the two types of property based
Schedule D. on their respective fair market values (FMVs) to figure the
• The gain or loss (including any related recapture) for part of the gain to be recaptured as ordinary income
partners and S corporation shareholders from certain because of depreciation. The disposition of each type of
section 179 property dispositions by partnerships and S property is reported separately in the appropriate part of
corporations. Form 4797. For example, for property held more than 1
• The computation of recapture amounts under sections year, report the sale of a building in Part III and the land in
179 and 280F(b)(2) when the business use of section 179 Part I.
or listed property decreases to 50% or less.
• Gains or losses treated as ordinary gains or losses, if Disposition of Depreciable Property Not Used in
you are a trader in securities or commodities and made a Trade or Business
mark-to-market election under section 475(f). Generally, gain from the sale or exchange of depreciable
• Election to defer a qualified section 1231 gain (gains property not used in a trade or business but held for
derived from the sale of property used in a trade or investment or for use in a not-for-profit activity is capital
business) invested in a qualified opportunity fund (QOF). gain. Generally, the gain is reported on Form 8949 and
Schedule D. However, part of the gain on the sale or
Other Forms You May Have To File exchange of the depreciable property may have to be
• Use Form 4684, to report involuntary conversions from recaptured as ordinary income on Form 4797. Use Part III
casualties and thefts. of Form 4797 to figure the amount of ordinary income
• Use Form 6252, to report the sale of property under the recapture. The recapture amount is included on line 31
installment method. (and line 13) of Form 4797. See the instructions for Part III.
• Use Form 8824, to report exchanges of qualifying If the total gain for the depreciable property is more than
business or investment real property for real property of a the recapture amount, the excess is reported on Form
like kind. For exchanges of real property used in a trade or 8949. On Form 8949, enter “From Form 4797” in column
business (and other noncapital assets), enter the gain or (a) of Part I (if the transaction is short term) or Part II (if the
(loss) from Form 8824, if any, on Form 4797, line 5 or transaction is long term), and skip columns (b) and (c). In
line 16. column (d), enter the excess of the total gain over the
• If you sold property on which you claimed investment recapture amount. Leave columns (e) through (g) blank
credit, see Form 4255, and its instructions to find out if you and complete column (h). If you invested this gain into a
must recapture some or all of the credit. QOF and intend to elect the temporary deferral of the
• Use Form 8949, to report the sale or exchange of gain, see the Instructions for Form 8949; Form 8997, Initial
capital assets not reported on another form or schedule; and Annual Statement of Qualified Opportunity Fund
gains from involuntary conversions (other than casualty or (QOF) Investments, and its instructions; and the
theft) of capital assets not used in your trade or business; instructions for the applicable Schedule D.
and nonbusiness bad debts. However, see Disposition of
Depreciable Property Not Used in Trade or Business, Generally, loss from the sale or exchange of
later. depreciable property not used in a trade or business but
• Use the applicable Schedule D, Capital Gains and held for investment or for use in a not-for-profit activity is a
Losses, for the return you are filing to figure the overall capital loss. Report the loss on Form 8949 in Part I (if the
gain or loss from transactions reported on Form 8949 and transaction is short term) or Part II (if the transaction is
to report transactions you don’t have to report on Form long term). You can deduct capital losses up to the
8949. See the Instructions for Form 8949 and the amount of your capital gains. In the case of taxpayers
instructions for the applicable Schedule D. other than corporations, you can also deduct the lower of
$3,000 ($1,500 if you are a married individual filing a
Additional information. See the instructions for the separate return), or the excess of such losses over such
forms listed above for more information. Also see Pub. gains. See the Instructions for Form 8949 and the
544, Sales and Other Dispositions of Assets, and Pub. Instructions for Schedule D (Form 1040).
550, Investment Income and Expenses.
Partial Dispositions of MACRS Property
Special Rules
You may elect to recognize a partial disposition of a
At-Risk Rules Modified Accelerated Cost Recovery System (MACRS)
asset, and report the gain, loss, or other deduction on a
If you report a loss on an asset used in an activity for
timely filed, including extensions, federal tax return for the
which you are not at risk, in whole or in part, see the
year of the disposition. In some cases, however, you are
Instructions for Form 6198. Also, see Pub. 925, Passive
required to report the gain or loss on the partial disposition
Activity and At-Risk Rules. Losses from passive activities
of a MACRS asset (see Required partial dispositions,
are subject first to the at-risk rules and then to the passive
later). MACRS assets include buildings (and their
activity rules.
structural components) and other tangible depreciable
Depreciable Property and Other Property property placed in service after 1986 that is used in a
trade or business or for the production of income.
Disposed of in the Same Transaction
If you disposed of both depreciable property and other For more information on partial dispositions of MACRS
property (for example, a building and land) in the same property, see Regulations section 1.168(i)-8(d).
transaction and realized a gain, you must allocate the

2 Instructions for Form 4797 (2023)

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Elective partial dispositions. If you elect to recognize a is treated as sold at its FMV on the last business day of
partial disposition of a MACRS asset, report the gain or that year.
loss (if any) on Form 4797, Part I, II, or III, as applicable, Unless you are a new taxpayer, the election must be
and include the words “Partial Disposition Election” in the made by the due date (not including extensions) of the tax
description of the partially disposed asset. See the return for the year prior to the year for which the election
instructions for Parts I, II, and III. For more information on becomes effective.
the disposition of MACRS assets, see Regulations section
1.168(i)-8. If you are a trader in securities or commodities with a
Required partial dispositions. Report the gain or loss mark-to-market election under section 475(f) in effect for
(if any) on the following partial dispositions of MACRS the tax year, the following special rules apply.
assets on Form 4797, Part I, II, or III, as applicable. • Gains and losses from all securities or commodities
• Sale of a portion of a MACRS asset. held in connection with your trading business (including
• Involuntary conversion of a portion of a MACRS asset those marked to market) are treated as ordinary income
other than from a casualty or theft. and losses, instead of capital gains and losses. As a
• Like-kind exchange of a portion of a MACRS asset result, the lower capital gain tax rates and the limitation on
(Form 4797, line 5 or 16). capital losses don’t apply.
• The gain or loss from each security or commodity held
See the instructions for lines 1b and 1c and the in connection with your trading business (including those
instructions for Parts I, II, and III. Also, see Other Forms marked to market) is reported on Form 4797, Part II,
You May Have To File, earlier. line 10. See Securities or Commodities Held by a Trader
Disposition of Assets That Constitute a Trade or Who Made a Mark-to-Market Election in the instructions
for line 10.
Business The wash sale rule does not apply to securities or
•
If you sell a group of assets that make up a trade or commodities held in connection with your trading
business and the buyer's basis in the assets are business.
determined wholly by the amount paid for the assets, both
you and the buyer must generally allocate the total sales For details on the mark-to-market election for traders
price to the assets transferred. File Form 8594, Asset and how to make the election, see section 475(f). Also
Acquisition Statement, to report the sale. See the see Pub. 550.
Instructions for Form 8594. Also, see Pub. 544 for more
details on the sale of business assets. Sale of Home Used for Business
If you sold property that was your home and you also used
Installment Sales it for business, you may need to use Form 4797 to report
If you sold property at a gain and you will receive a the sale of the part used for business (or the sale of the
payment in a tax year after the year of sale, you must entire property if used entirely for business). Gain or loss
generally report the sale on the installment method unless on the sale of the home may be a capital gain or loss or an
you elect not to do so. ordinary gain or loss. Any gain on the personal part of the
property is a capital gain. You cannot deduct a loss on the
Use Form 6252 to report the sale on the installment personal part. Any gain or loss on the part of the home
method. Also use Form 6252 to report any payment used for business is an ordinary gain or loss, as
received during your 2023 tax year from a sale made in an applicable, reportable on Form 4797. Any gain or loss on
earlier year that you reported on the installment method. the part producing income for which the underlying activity
Enter any gain from the installment sale on Form 4797, does not rise to the level of a trade or business is a capital
line 4 or line 15, as applicable. See the instructions for gain or loss, as applicable. See Disposition of Depreciable
Form 6252. Property Not Used in Trade or Business, earlier. For more
To elect out of the installment method, report the full details, see Pub. 544. Also, see Pub. 523, Selling Your
amount of the gain on a timely filed return (including Home.
extensions). If you timely filed your tax return without Exclusion of gain on sale of home used for business.
making the election, you can still make the election by You may be able to exclude part or all of the gain figured
filing an amended return within 6 months of the due date on Form 4797 if the property sold was used for business
of your return (excluding extensions). Enter “Filed and was also owned and used as your principal residence
pursuant to section 301.9100-2” at the top of the amended during the 5-year period ending on the date of the sale.
return. During that 5-year period, you must have owned and used
For a detailed discussion of installment sales, see Pub. the property as your personal residence for 2 or more
537. years. However, the exclusion may not apply to the part of
the gain that is allocated to any period after December 31,
Traders Who Made a 2008, during which the property was not used as your
Mark-to-Market Election principal residence.
A trader in securities or commodities may elect under If the property was held more than 1 year after you
section 475(f) to use the mark-to-market method to converted it to business use, complete Part III to figure the
account for securities or commodities held in connection amount of the gain. Do not take the exclusion into account
with a trading business. Under this method of accounting, when figuring the gain on line 24. If line 22 includes
any security or commodity held at the end of the tax year depreciation for periods after May 6, 1997, you cannot

Instructions for Form 4797 (2023) 3

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exclude gain to the extent of that depreciation. On Part I, current tax year’s income. If you make the election, the
line 2, enter “Section 121 exclusion,” and enter the amount eligible capital gain is included in taxable income only to
of the exclusion as a (loss) in column (g). the extent, if any, the amount of realized gain exceeds the
If the property was held for 1 year or less after you aggregate amount invested in a QOF during the 180-day
converted it to business use, report the sale and the period.
amount of the exclusion, if any, in a similar manner on Part A taxpayer may elect to temporarily defer a qualified
II, line 10. section 1231 gain (gains derived from the sale of property
For details and exceptions, including how to figure gain used in a trade or business, including gains from
on the sale of a home used for business and the amount installment sales and like-kind exchanges) by investing
of the exclusion, see section 121 and Pub. 523. the amount of the eligible gain into a QOF. Qualified
section 1231 gains are eligible to be invested into a QOF
Involuntary Conversion of Property to the extent the section 1231 gain exceeds any amount
You may not have to pay tax on a gain from an involuntary that is treated as ordinary income due to depreciation
or compulsory conversion of property. See Pub. 544 for recapture as required by sections 1245 and 1250.
details. Sections 1245 and 1250 gain may not be deferred into a
QOF. For more information, see section 1400Z-2 and the
Passive Loss Limitations related regulations.
If you have an overall loss from passive activities and you How to report. Report the gain including any
report a loss on an asset used in a passive activity, use depreciation recapture required by sections 1245 and
Form 8582, Passive Activity Loss Limitations, or Form 1250 as it would otherwise be reported if you were not
8810, Corporate Passive Activity Loss and Credit making the election. Then, on Form 4797, line 2, report
Limitations, as applicable, to see how much loss is the qualified section 1231 gains you are electing to defer
allowed before entering it on Form 4797. as a result of an investment into a QOF within 180 days of
the date sold. If you are reporting the sale directly on Form
You cannot claim unused passive activity credits when
4797, line 2, use the line directly below the line on which
you dispose of your interest in an activity. However, if you
you reported the sale. In column (a), identify the section
dispose of your entire interest in an activity, you may elect
1231 gains invested into a QOF as “QOF investment to
to increase the basis of the credit property by the original
Form 8949”; columns (b), (c), (d), (e), and (f) will remain
basis reduction of the property to the extent that the credit
blank. Report the amount of section 1231 gains invested
has not been allowed because of the passive activity
into a QOF as a negative amount (in parentheses) in
rules. Make the election on Form 8582-CR, Passive
column (g).
Activity Credit Limitations, or Form 8810, as applicable.
No basis adjustment may be elected on a partial For example, if a taxpayer realizes $300,000 of section
disposition of your interest in an activity. 1231 gains in a tax year but chooses to defer $75,000 of
section 1231 gains by investing those gains into a QOF
Recapture of Preproductive Expenses within 180 days of the date of sale, the taxpayer would
If you elect under section 263A(d)(3) not to use the enter “QOF investment to Form 8949” in column (a) and
uniform capitalization rules of section 263A, any plant that enter ($75,000) in column (g).
you produce is treated as section 1245 property. For Similarly, if the taxpayer disposed of an investment in a
dispositions of plants reportable on Form 4797, enter the QOF during the tax year triggering recognition of section
recapture amount taxed as ordinary income on Part III, 1231 deferred gains, the taxpayer should report the gain
line 22. See Disposition of plants in chapter 9 of Pub. 225, on a separate row in line 2, enter “QOF inclusion from
Farmer's Tax Guide, for details. section 1231 gains” in column (a), and report the $75,000
of previously deferred and currently recognizable section
Section 197(f)(9)(B)(ii) Election 1231 gains as a positive number in column (g).
If you made the election under section 197(f)(9)(B)(ii) to Make the election for the deferred amount invested in a
recognize gain on the disposition of a section 197 QOF on Form 8949. See the Instructions for Form 8949. If
intangible and to pay a tax on that gain at the highest tax you held a qualified investment in a QOF at any time
rate, include the additional tax on Form 1040, line 16 (or during the year, you must file your return with Form 8997
the appropriate line of other income tax returns). Check attached. See the instructions for Form 8997. For more
box 3 and enter “197” and the tax in the space next to that information about QOFs, see IRS.gov/Ozfaqs.
box. The additional tax is the amount that, when added to
any other income tax on the gain, equals the gain Exclusion of Gain From Sale of DC Zone Assets
multiplied by the highest tax rate. If you sold or exchanged a District of Columbia Enterprise
Zone (DC Zone) asset that you acquired after 1997 and
Deferral of Gain Invested in a Qualified
before 2012, and held for more than 5 years, you may be
Opportunity Fund (QOF) able to exclude the amount of “qualified capital gain.” This
If you realized a gain from an actual or deemed sale or exclusion applies to an interest in, or property of, certain
exchange with an unrelated person and, during the businesses operating in the District of Columbia.
180-day period beginning on the date the gain is realized,
DC Zone asset. A DC Zone asset is any of the following.
you invested any portion of the gain in a QOF, then you
may be able to elect to temporarily defer such eligible • DC Zone business stock.
capital gain that would otherwise be includible in the • DC Zone partnership interest.

4 Instructions for Form 4797 (2023)

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• DC Zone business property. See section 1400F (as in effect before its repeal) for
more details and special rules.
Qualified capital gain. The qualified capital gain is any
gain recognized on the sale or exchange of a DC Zone How to report. If applicable, report the entire gain
asset that is a capital asset or property used in a trade or realized from the sale or exchange as you otherwise
business that you would otherwise include on Form 4797, would without regard to the exclusion. To report the
Part I. It does not include any of the following gain. exclusion, enter “Qualified Community Asset Exclusion”
• Gain treated as ordinary income under section 1245. on Form 4797, line 2, column (a), and enter as a (loss) in
• Section 1250 gain figured as if section 1250 applied to column (g) the amount of the exclusion that offsets the
all depreciation rather than the additional depreciation. gain reported on Part I, line 6.
• Gain attributable to real property, or an intangible asset,
which is not an integral part of a DC Zone business.
• Gain from a related-party transaction. See Sales and Specific Instructions
Exchanges Between Related Persons in chapter 2 of Pub.
544. Note. To show losses, enclose figures in (parentheses).
• Gain attributable to periods after December 31, 2016. If you disposed of property you acquired by inheritance
See section 1400B (as in effect before its repeal) for from someone who died, enter “INHERITED” in column
more details and special rules. (b) instead of the date you acquired the property. Also
report the sale or exchange that way if you inherited the
How to report. If applicable, report the entire gain property from someone who died in 2010 and the
realized from the sale or exchange as you otherwise executor of the decedent's estate did not elect under
would without regard to the exclusion. To report the section 1022 to file Form 8939.
exclusion, enter “DC Zone Asset Exclusion” on Form
4797, line 2, column (a), and enter as a (loss) in column Disposition by a Partnership or S
(g) the amount of the exclusion that offsets the gain Corporation of Section 179 Property
reported on Part I, line 6.
Partners and S corporation shareholders. If you
Any unrecaptured section 1250 gain is not
received a Schedule K-1 from a partnership or S
! qualified capital gain. Identify the amount of gain corporation reporting the sale, exchange, or other
CAUTION that is unrecaptured section 1250 gain and report
disposition of property for which a section 179 expense
it on the Schedule D for the return you are filing.
deduction was previously claimed and passed through to
its partners or shareholders, you must report your share of
Exclusion of Gain From Qualified Community the transaction on Form 4797, 4684, 6252, or 8824
Assets (whether or not you were a partner or shareholder at the
If you sold or exchanged a qualified community asset time the section 179 deduction was claimed).
acquired after 2001 and before 2010, you may be able to Use the worksheet, later, to figure the amount to report
exclude the “qualified capital gain.” The qualified gain is, on Form 4797, 4684, 6252, or 8824, and to figure any
generally, any gain recognized in a trade or business that reduction in your carryforward of the unused section 179
you would otherwise include on Form 4797, Part I. This expense deduction. The partnership or S corporation
exclusion also applies to an interest in, or property of, must provide the following information on Schedule K-1 for
certain renewal community businesses. See sections the transaction.
1400F(c) and (d) (as in effect before their repeal) for • Description of the property.
special rules and limitations. • Date the property was acquired and placed in service.
Qualified community asset. A qualified community • Date of the sale or other disposition of the property.
asset is any of the following. • Your share of the gross sales price or amount realized.
• Qualified community stock. Enter this amount on line 1 of the worksheet.
• Qualified community partnership interest. • Your share of the cost or other basis plus the expense
• Qualified community business property. of sale. Enter this amount on line 2 of the worksheet.
• Your share of the depreciation allowed or allowable, but
Qualified capital gain. Qualified capital gain is any gain excluding the section 179 expense deduction. Enter this
recognized on the sale or exchange of a qualified amount on line 3a of the worksheet.
community asset that is a capital asset or property used in • Your share of the section 179 expense deduction
a trade or business. It does not include any of the passed through for the property and the partnership's or S
following gains. corporation's tax year(s) in which the amount was passed
• Gain treated as ordinary income under section 1245. through. Enter on line 3b of the worksheet your share of
• Section 1250 gain figured as if section 1250 applied to the total amount of the section 179 expense deduction
all depreciation rather than the additional depreciation. passed through for the property (even if you were not a
• Gain attributable to real property, or an intangible asset, partner or shareholder for the tax year in which it was
that is not an integral part of a renewal community passed through or you did not deduct all or part of the
business. section 179 expense because of the dollar or taxable
• Gain from a related-party transaction. See Sales and income limitations). The tax year(s) in which the amount
Exchanges Between Related Persons in chapter 2 of Pub. was passed through is provided so you can determine the
544. amount of unused carryover section 179 expense (if any)
• Gains from periods after December 31, 2014. for the property to report on line 3c.

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• If the disposition is due to a casualty or theft, a • Disposal of timber with a retained economic interest
statement indicating so, and any additional information that is treated as a sale, or an outright sale of timber,
you need to complete Form 4684. under section 631(b).
• If the disposition was an installment sale made during • Disposal of coal (including lignite) or domestic iron ore
the partnership's or S corporation's tax year reported with a retained economic interest that is treated as a sale
using the installment method, any information you need to under section 631(c).
complete Form 6252. The partnership or S corporation • Sales or exchanges of cattle and horses, regardless of
must also separately report your share of all payments age, used in a trade or business for draft, breeding, dairy,
received for the property in the following tax years. or sporting purposes and held for 24 months or more from
• If the disposition was a disposition of property given up acquisition date.
in an exchange involving like-kind property made during • Sales or exchanges of livestock other than cattle and
the partnership's or S corporation's tax year, any horses, regardless of age, used in a trade or business for
information you need to complete Form 8824. draft, breeding, dairy, or sporting purposes and held for 12
If you have a carryforward of unused section 179 months or more from acquisition date.
expense deduction that includes section 179 expense
deduction previously passed through to you for the Note. Livestock does not include poultry, chickens,
disposed asset, you must reduce your carryforward by turkeys, pigeons, geese, other birds, fish, frogs, reptiles,
your share of the section 179 expense deduction shown etc.
on Schedule K-1 (or the amount attributable to that • Sales or exchanges of certain unharvested crops. See
property included in your carryforward amount). section 1231(b)(4).
• Involuntary conversions of trade or business property or
Note. Partnerships and S corporations do not report
capital assets held more than 1 year in connection with a
these transactions on Form 4797, 4684, 6252, or 8824.
trade or business or a transaction entered into for profit.
Instead, they provide their partners and shareholders the
These conversions may result from (a) part or total
information they need to report the transactions. See the
destruction, (b) theft or seizure, or (c) requisition or
Instructions for Form 1065 or the Instructions for Form
condemnation (whether threatened or carried out).
1120-S for details on the information that must be
However, if any recognized losses were from involuntary
reported on Schedule K-1.
conversions from fire, storm, shipwreck, or other casualty
Line 1 or from theft and the losses exceed the recognized gains
from the conversions, do not include any gains or losses
Line 1a. Enter on line 1a the total gross proceeds from: from such conversions when figuring your net section
• Sales or exchanges of real estate reported to you for 1231 gains and section 1231 losses.
2023 on Form(s) 1099-S (or substitute statement(s)) that Transactions to which section 1231 does not apply.
you are including on line 2, 10, or 20; and Section 1231 transactions do not include sales or
• Sales of securities or commodities reported to you for exchanges of:
2023 on Form(s) 1099-B (or substitute statement(s)) that • Inventory or property held primarily for sale to
you are including on line 10 because you are a trader with customers;
a mark-to-market election under section 475(f) in effect for • Patents; inventions; models or designs (whether or not
the tax year. See Traders Who Made a Mark-to-Market patented); secret formulas or processes; copyrights;
Election, earlier, and the instructions for line 10, later. literary, musical, or artistic compositions; letters or
Line 1b. Enter on line 1b the total amount of gain that you memoranda; or similar property (a) created by your
are including on lines 2, 10, and 24 due to the partial personal efforts, (b) prepared or produced for you (in the
dispositions of MACRS assets. See Partial Dispositions of case of letters, memoranda, or similar property), or (c)
MACRS Property, earlier. received from someone who created them or for whom
they were created, as mentioned in (a) or (b), in a way that
Line 1c. Enter on line 1c the total amount of loss that you entitled you to the basis of the previous owner (such as by
are including on lines 2 and 10 due to partial dispositions gift); or
of MACRS assets. See Partial Dispositions of MACRS • U.S. Government publications, including the
Property, earlier. Congressional Record, that you:
Part I 1. Received from the government other than by
Use Part I to report section 1231 transactions that are not purchase at the normal sales price; or
required to be reported in Part III. 2. Received from someone who had received it from
the government, other than by purchase at the normal
Section 1231 transactions. The following are section
sales price, in a way that entitled you to the previous
1231 transactions.
owner’s basis (such as by gift).
• 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 Line 7
after you received the property and include the day you Partners and S corporation shareholders receive a
disposed of it. Schedule K-1 (Form 1065 or Form 1120-S), which
• Cutting of timber that the taxpayer elects to treat as a includes amounts that must be reported on Form 4797.
sale or exchange under section 631(a). Following the Instructions for Schedule K-1, enter any

6 Instructions for Form 4797 (2023)

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   Worksheet for Partners and S Corporation Shareholders To
        Figure Gain or Loss on Dispositions of Property for
        Which a Section 179 Deduction Was Claimed
                                                                                                                                                   Keep for Your Records
                               Caution: See the Worksheet Instructions below before starting.
1. Gross sales price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.  
2. Cost or other basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.  
3. a.   Depreciation (excluding section 179 expense deduction) . . . . . . . . . . .                        3a.  
   b.   Section 179 expense deduction . . . . . . . . . . . . . . . . . .                 3b.  
   c.   Unused carryover of section 179 expense 
        deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3c.  
   d.   Subtract line 3c from line 3b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3d.  
   e.   Add lines 3a and 3d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        3e.  
4. Adjusted basis. Subtract line 3e from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  4.  
5. Gain or loss. Subtract line 4 from line 1. (See Where To Report Amounts From Worksheet below.) . . . . . . . . . .                                                          5.  

                                                   Worksheet Instructions
Caution: For a disposition due to casualty or theft, skip lines 1 and 5 and enter the amount from line 4 on Form 4684, line 20, and 
complete the rest of Form 4684.
Lines 1, 2, 3a, and 3b. Enter these amounts from Schedule K-1 (Form 1065 or 1120-S).
Line 3c. If you were unable to claim all of the section 179 expense deduction previously passed through to you for the property (if 
any), enter the smaller of line 3b or the portion of your unused carryover of section 179 expense deduction attributable to the 
property. Make sure you reduce your carryover of disallowed section 179 expense deduction shown on Form 4562 by the amount on 
line 3c.
                                  Where To Report Amounts From Worksheet
Generally, the information from the above worksheet is reported on the lines specified below for Form 4797, Part III. However, for a 
disposition under the installment method, complete the lines shown below for Form 6252. For dispositions of property given up in an 
exchange involving like-kind property, complete the lines shown below for Form 8824.
       If line 5 is a gain and the property was held more than 1 year, report the disposition as follows.
      • Complete Form 4797, line 19, columns (a), (b), and (c); Form 6252, lines 1 through 4; or Form 8824, Parts I and II.
      • Report the amount from line 1 above on Form 4797, line 20; Form 6252, line 5; or Form 8824, line 12 or 16.
      • Report the amount from line 2 above on Form 4797, line 21; or Form 6252, line 8.
      • Report the amount from line 3e above on Form 4797, line 22; or Form 6252, line 9.
      • Report the amount from line 4 above on Form 4797, line 23; Form 6252, line 10; or Form 8824, line 13 or 18.
      • Complete the rest of the applicable form.
       If line 5 is zero or a loss and the property was held more than 1 year, report the disposition as follows. Do not report a loss on 
       Form 6252; instead, report the disposition on the lines shown for Form 4797.
      • Complete Form 4797, line 2, columns (a), (b), and (c); or Form 8824, Parts I and II.
      • Report the amount from line 1 above on Form 4797, line 2, column (d); or Form 8824, line 12 or 16.
      • Report the amount from line 2 above on Form 4797, line 2, column (f).
      • Report the amount from line 3e above on Form 4797, line 2, column (e).
      • Report the amount from line 4 above on Form 8824, line 13 or 18.
      • Complete the rest of the applicable form. 
       If the property was held 1 year or less, report the gain or loss on the disposition as shown below. Do not report a loss on 
       Form 6252; instead, report the disposition on the lines shown for Form 4797.
      • Complete Form 4797, line 10, columns (a), (b), and (c); Form 6252, lines 1 through 4; or Form 8824, Parts I and II.
      • Report the amount from line 1 above on Form 4797, line 10, column (d); Form 6252, line 5; or Form 8824, line 12 or 16.
      • Report the amount from line 2 above on Form 4797, line 10, column (f); or Form 6252, line 8.
      • Report the amount from line 3e above on Form 4797, line 10, column (e); or Form 6252, line 9.
      • Report the amount from line 4 above on Form 6252, line 10; or Form 8824, line 13 or 18.
      • Complete the rest of the applicable form.

amounts from your Schedule K-1 (Form 1120-S), box 9, or                                   long-term capital gain on the Schedule D for the return you 
Schedule K-1 (Form 1065), box 10, in Part I of Form 4797.                                 are filing.

If the amount from line 7 is a gain and you have                                          Line 8
nonrecaptured section 1231 losses from prior years, see 
                                                                                          Your nonrecaptured section 1231 losses are your net 
the instructions for line 8, later. If the amount from line 7 is 
                                                                                          section 1231 losses deducted during the 5 preceding tax 
a gain and you did not have nonrecaptured section 1231 
                                                                                          years that have not yet been applied against any net 
losses from prior years, enter the gain from line 7 as a 
                                                                                          section 1231 gain to determine how much net section 
                                                                                          1231 gain is treated as ordinary income under this rule.

Instructions for Form 4797 (2023)                                                                                                                                                  7

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You had a net section 1231 loss if section 1231 losses • A depository institution holding company defined in
exceeded section 1231 gains. Gains are included only to section 3(w)(1) of the Federal Deposit Insurance Act.
the extent taken into account in figuring gross income.
Losses are included only to the extent taken into account Also, for this purpose, “applicable preferred stock” is
in figuring taxable income except that the limitation on preferred stock of the Federal National Mortgage
capital losses does not apply. Association (Fannie Mae), or the Federal Home Loan
Mortgage Corporation (Freddie Mac) that was:
Your net section 1231 gain on line 7 is treated as Held by the applicable financial institution on
•
ordinary income to the extent of your nonrecaptured September 6, 2008; or
section 1231 losses. See the example below. Sold or exchanged by the applicable financial institution
•
Example. You had net section 1231 losses of $4,000 after December 31, 2007, and before September 7, 2008.
and $6,000 in 2018 and 2019, respectively, and net
section 1231 gains of $3,000 and $2,000 in 2022 and In the case of a sale or exchange of applicable
2023, respectively. The 2023 net section 1231 gain of preferred stock after September 6, 2008, by a taxpayer
$2,000 is entered on line 7 and the nonrecaptured net that held such preferred stock on September 6, 2008,
section 1231 losses of $7,000 ($10,000 net section 1231 these provisions apply only where the taxpayer was an
losses minus the $3,000 that was applied against the applicable financial institution at all times during the period
2023 net section 1231 gain) are entered on line 8. The beginning on September 6, 2008, and ending on the date
entire $2,000 net section 1231 gain on line 7 is treated as of the sale or exchange of the applicable preferred stock.
ordinary income and is entered on line 12 of Form 4797. Therefore, any Fannie Mae or Freddie Mac preferred stock
For recordkeeping purposes, the $4,000 loss from 2018 is held by a taxpayer that was not an applicable financial
all recaptured ($3,000 in 2022 and $1,000 in 2023), and institution on September 6, 2008, is not applicable
you have $5,000 of section 1231 losses from 2019 left to preferred stock (even if such taxpayer subsequently
recapture ($6,000 minus the $1,000 recaptured this year). became an applicable financial institution).

Line 9 For guidance on preferred stock held indirectly by
For recordkeeping purposes, if line 9 is zero, the amount applicable financial institutions through partnerships and
on line 7 is the amount of net section 1231 loss recaptured subsidiaries, see Rev. Proc. 2008-64, 2008-47 I.R.B.
in 2023. If line 9 is more than zero, you have recaptured all 1195, available at IRS.gov/irb/2008-47_IRB/ar12.html.
of your net section 1231 losses from prior years.
Deferred Gain From Qualifying Electric
If line 9 is more than zero, enter the amount from line 8
Transmission Transaction
on line 12. Enter the gain from line 9 as a long-term capital
gain on the Schedule D for the return you are filing.
If you sold or exchanged qualifying electric transmission
Part II property before January 1, 2008 (before January 1, 2021,
If a transaction is not reportable in Part I or Part III and the for a qualified electric utility), and elected to defer the
property is not a capital asset reportable on Schedule D, realized gain, the deferred gain is recognized ratably over
report the transaction in Part II. the 8-year period that began with the tax year that
includes the date of the disposition. See section 451(k) for
If you received ordinary income from a sale or other more information on making the election for qualifying
disposition of your interest in a partnership, see Pub. 541, transactions.
Partnerships.
Include the applicable portion of the deferred gain for
Line 10 the current tax year on line 10. Enter “Deferred gain under
Report on line 10 ordinary gains and losses, not included section 451(k)” in column (a) and 1/8 of the deferred gain
on lines 11 through 16, including gains and losses from in column (g).
property held 1 year or less.
Securities or Commodities Held by a Trader Who
If you receive ordinary income from a sale or other
disposition of property and deducted the cost of the Made a Mark-to-Market Election
property under the tangible property de minimis safe
harbor, report the income on line 10. Report on line 10 all gains and losses from sales and
dispositions of securities or commodities held in
Deduct the loss from a qualifying abandonment of connection with your trading business, including gains and
business or investment property on line 10. See losses from marking to market securities and commodities
Abandonments in Pub. 544 for more information. held at the end of the tax year (see Traders Who Made a
Mark-to-Market Election, earlier). Attach to your tax return
Gain or Loss From Certain Preferred Stock a statement, using the same format as line 10, showing
the details of each transaction. Separately show and
Gain or loss recognized by any “applicable financial identify securities or commodities held and marked to
institution” from the sale or exchange of "any applicable market at the end of the year. On line 10, enter
preferred stock" is ordinary income or loss. An applicable “Trader—see attached” in column (a) and the totals from
financial institution includes: the statement in columns (d), (f), and (g). Also, see the
• A financial institution defined in section 582(c)(2), and instructions for line 1, earlier.

8 Instructions for Form 4797 (2023)

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Small Business Investment Company Stock Use Part III to figure recapture of depreciation and other
items that must be reported as ordinary income on the
Report on line 10 ordinary losses from the sale or disposition of certain property. Complete lines 19 through
exchange (including worthlessness) of stock in a small 24 to determine the gain on the disposition of the property.
business investment company operating under the Small If you have more than four properties to report, use
Business Investment Act of 1958. See additional forms. For more details on depreciation
section 1242. recapture, see Pub. 544.
Also attach a statement that includes the name and If the property was sold on the installment sale basis,
address of the small business investment company and, if see the instructions for Form 6252 before completing Part
applicable, the reason the stock is worthless and the III. Also, if you have both installment sales and
approximate date it became worthless. noninstallment sales, you may want to use separate
Forms 4797, Part III, for the installment sales and the
noninstallment sales.
Section 1244 (Small Business) Stock
Note. If you sold or otherwise disposed of property for
Individuals report ordinary losses from the sale or which you elected to treat as an expense the costs of
exchange (including worthlessness) of section 1244 certain real property, special rules apply. See section 179.
(small business) stock on line 10. For special rules for determining gain or loss and
determining if the basis of the property is treated as
The maximum amount that may be treated as an section 1245 or section 1250 property, see Pub. 544.
ordinary loss on Form 4797 is $50,000 ($100,000 if
married filing jointly). Special rules may limit the amount of Line 20
your ordinary loss if (a) you received section 1244 stock in
The gross sales price includes money, the FMV of other
exchange for property with a basis in excess of its FMV, or
property received, and any existing mortgage or other
(b) your stock basis increased because of contributions to
debt the buyer assumes or takes the property subject to.
capital or otherwise. See Pub. 550 for more details,
For casualty or theft gains, include insurance or other
including information on what is section 1244 (small
reimbursement you received or expect to receive for each
business) stock.
item. Include on this line your insurance coverage,
Attach a computation of the loss from the sale or whether or not you are submitting a claim for
exchange of section 1244 property. On line 10, enter reimbursement.
“Losses on Section 1244 (Small Business Stock)” in For section 1255 property disposed of in a sale,
column (a), and enter the allowable loss in column (g). exchange, or involuntary conversion, enter the amount
Report on Schedule D losses in excess of the maximum realized. For section 1255 property disposed of in any
amount that may be treated as an ordinary loss (and all other way, enter the FMV.
gains) from the sale or exchange of section 1244 stock.
Line 21
Keep adequate records to distinguish section 1244 Reduce the cost or other basis of the property by the
stock from any other stock owned in the same amount of any enhanced oil recovery credit or disabled
corporation. access credit. However, do not adjust the cost or other
Line 18a basis for any of the items taken into account on line 22.

You must complete this line if there is a gain on Form Line 22
4797, line 3; a loss on Form 4797, line 11; and a loss on Complete the following steps to figure the amount to enter
Form 4684, line 35, column (b)(ii). Enter on this line the on line 22.
smaller of the loss on Form 4797, line 11, or the loss on
Form 4684, line 35, column (b)(ii). To figure which loss is Step 1. Add amounts such as the following.
smaller, treat both losses as positive numbers. Enter the • Deductions allowed or allowable for depreciation
loss from income-producing property on Schedule A (including any special depreciation allowance (see the
(Form 1040), line 16. Identify it as from “Form 4797, Instructions for Form 4562)), amortization, depletion, or
line 18a.” Do not include any loss from property used as preproductive expenses (see Disposition of plants in
an employee. chapter 9 of Pub. 225).
• The section 179 expense deduction.
Part III • The commercial revitalization deduction for buildings
placed in service before 2010.
Partners and shareholders reporting a disposition
TIP of section 179 property which was separately • The downward basis adjustment under section 50(c) (or
the corresponding provision of prior law).
reported to you on Schedule K-1 (Form 1065 or
1120-S), see Partners and S corporation shareholders at • The deduction for qualified clean-fuel vehicle property
or refueling property.
the beginning of the Specific Instructions, earlier.
• Deductions claimed under section 190, 193, or 1253(d)
Generally, for property held 1 year or less, do not (2) or (3) (as in effect before the enactment of P.L.
complete Part III; instead, use Part II. For exceptions, see 103-66).
the chart Where To Make First Entry for Certain Items • The basis reduction for any qualified plug-in electric or
Reported on This Form, earlier. qualified electric vehicle credit.

Instructions for Form 4797 (2023) 9

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• The basis reduction for the employer-provided childcare 4. Deduction for capital costs incurred in complying
facility credit. with Environmental Protection Agency sulfur regulations.
• Any applicable deduction for qualified energy efficient 5. Deduction for certain qualified refinery property, if in
commercial building property. See section 179D. effect before the repeal by the Tax Increase Prevention Act
• The basis reduction for the alternative motor vehicle of 2014. (Repealed by P.L. 113-295, section 221(a)(34)
credit. (A), except with regards to deductions made prior to
• Any applicable basis reduction for the alternative fuel December 19, 2014.)
vehicle refueling property credit.
6. Any applicable deduction for qualified energy
• Any applicable basis adjustment for advanced
efficient commercial building property. See section 179D.
manufacturing investment credit property. See section
48D(d)(5). 7. Deduction for election to expense qualified
advanced mine safety equipment property.
Step 2. From the Step 1 total, subtract amounts such as
the following. 8. Amortization of railroad grading and tunnel bores if
• Any investment credit recapture amount if the basis of in effect before the repeal by the Revenue Reconciliation
the property was reduced in the tax year the property was Act of 1990. (Repealed by P.L. 99-514, Tax Reform Act of
placed in service under section 50(c)(1) (or the 1986, section 242(a).)
corresponding provision of prior law). See section 50(c)(2) 9. Certain expenditures for childcare facilities if in
(or the corresponding provision of prior law). effect before the repeal by P.L. 101-508, section 11801(a)
• Any section 179 or 280F(b)(2) recapture amount (13). (Repealed by P.L. 101-508, Omnibus Budget
included in gross income in a prior tax year because the Reconciliation Act of 1990, section 11801(a)(13), except
business use of the property decreased to 50% or less. with regards to deductions made prior to November 5,
• Any qualified clean-fuel vehicle property or refueling 1990.)
property deduction you were required to recapture. 10. Expenditures to remove architectural and
• Any basis increase for qualified plug-in electric or transportation barriers to the handicapped and elderly.
qualified electric vehicle credit recapture. 11. Deduction for qualified tertiary injectant expenses.
• Any basis increase for recapture of the
employer-provided childcare facility credit. 12. Certain reforestation expenditures.
• Any basis increase for recapture of the alternative motor • Tangible real property (except buildings and their
vehicle credit. structural components) if it is used in any of the following
• Any basis increase for recapture of the alternative fuel ways.
vehicle refueling property credit. 1. As an integral part of manufacturing, production, or
• Any qualified disaster expense recapture. extraction, or of furnishing transportation,
• Any applicable recapture of the advanced communications, or certain public utility services.
manufacturing investment credit. 2. As a research facility in these activities.
For more information on amounts recaptured as 3. For the bulk storage of fungible commodities
depreciation allowed or allowable, see chapter 3 of Pub. (including commodities in a liquid or gaseous state) used
544. in these activities.
You may have to include depreciation allowed or • A single purpose agricultural or horticultural structure
allowable on another asset (and refigure the basis amount (as defined in section 168(i)(13)).
for line 21) if you use its adjusted basis in determining the • A storage facility (not including a building or its
adjusted basis of the property described on line 19. structural components) used in connection with the
distribution of petroleum or any primary petroleum
Line 23 product.
For section 1255 property, enter the adjusted basis of the • Any railroad grading or tunnel bore (as defined in
section 126 property disposed of. section 168(e)(4)).
Exceptions and limits. Special rules apply to the
Line 25
following.
Section 1245 property. Section 1245 property is • Gifts.
property that is depreciable (or amortizable or treated as • Transfers at death.
amortizable under, for example, section 181, 185 • Certain tax-free transactions.
(repealed), 197, or 1253(d)(2) or (3) (as in effect before • Certain like-kind exchanges, involuntary conversions,
the enactment of P.L. 103-66)) and is one of the following. etc.
• Personal property. • Property distributed by a partnership to a partner.
• Elevators and escalators placed in service before 1987. • Transfers to tax-exempt organizations where the
• Real property (other than property described under property will be used in an unrelated business.
tangible real property, later) adjusted for the following. • Timber property.
1. Amortization of certified pollution control facilities. • Dispositions of amortizable section 197 intangibles.
For more information, see section 1245(b). Also, see Pub.
2. The section 179 expense deduction.
544.
3. Deduction for clean-fuel vehicles and certain
refueling property.

10 Instructions for Form 4797 (2023)

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Line 26 (1) (or the corresponding provision of prior law) to figure
straight line depreciation. Also, if you claimed a
Section 1250 property. Section 1250 property is commercial revitalization deduction, figure straight line
depreciable real property (other than section 1245 depreciation using the property's applicable recovery
property). Generally, section 1250 recapture applies if you period under section 168.
used an accelerated depreciation method or you claimed
any special depreciation allowance, or the commercial
revitalization deduction. Line 26b

Section 1250 recapture does not apply to dispositions Generally, use 100% as the percentage for this line.
of the following MACRS property placed in service after However, for low-income rental housing described in
1986 (or after July 31, 1986, if elected). You are not clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B), see that
required to calculate additional depreciation for these section for the percentage to use.
properties on line 26.
• 27.5-year (30- or 40-year, if elected or required)
Line 26d
residential rental property (except for 27.5-year qualified
New York Liberty Zone property acquired after September Enter the additional depreciation after 1969 and before
10, 2001). 1976. If straight line depreciation exceeds the actual
• 22-, 31.5-, or 39-year (or 40-year, if elected or required) depreciation for the period after 1975, reduce line 26d by
nonresidential real property (except for 39-year qualified the excess. Do not enter less than zero on line 26d.
New York Liberty Zone property acquired after September
10, 2001, and property for which you elected to claim a
commercial revitalization deduction). Line 26f

ACRS property. Real property depreciable under ACRS The amount the corporation treats as ordinary income
(pre-1987 rules) is subject to recapture under section under section 291 is 20% of the excess, if any, of the
1245, except for the following, which are treated as amount that would be treated as ordinary income if such
section 1250 property. property were section 1245 property, over the amount
• 15-, 18-, or 19-year real property and low-income treated as ordinary income under section 1250. If the
housing that is residential rental property. corporation used the straight line method of depreciation,
• 15-, 18-, or 19-year real property and low-income the ordinary income under section 291 is 20% of the
housing that is used mostly outside the United States. amount figured under section 1245.
• 15-, 18-, or 19-year real property and low-income
housing for which a straight line election was made. Line 27
• Low-income rental housing described in clause (i), (ii), Partnerships skip this section. Partners must enter on the
(iii), or (iv) of section 1250(a)(1)(B). See the instructions applicable lines of Part III amounts subject to section 1252
for line 26b, later. according to instructions from the partnership.
Exceptions and limits. See section 1250(d) for You may have ordinary income on the disposition of
exceptions and limits involving the following. certain farmland held more than 1 year but less than 10
• Gifts. years.
• Transfers at death.
• Certain tax-free transactions. See section 1252 to determine if there is ordinary
• Certain like-kind exchanges, involuntary conversions, income on the disposition of certain farmland for which
etc. deductions were allowed under section 175 (relating to
• Property distributed by a partnership to a partner. soil and water conservation).
• Disposition of qualified low-income housing.
• Transfers of property to tax-exempt organizations if the Gain from disposition of certain farmland is subject to
property will be used in an unrelated business. ordinary income rules under section 1252 before the
• Dispositions of property as a result of foreclosure application of section 1231 (Part I).
proceedings. Enter 100% of line 27a on line 27b except as follows.
Special rules. Special rules apply in the following cases. • 80% if the farmland was disposed of within the 6th year
• For additional depreciation attributable to rehabilitation after it was acquired.
expenditures, see section 1250(b)(4). • 60% if disposed of within the 7th year.
• If substantial improvements have been made, see • 40% if disposed of within the 8th year.
section 1250(f). • 20% if disposed of within the 9th year.
Skip line 27 if you dispose of such farmland during the
Line 26a 10th or later year after you acquired it.

Enter the additional depreciation for the period after 1975. Line 28
Additional depreciation is the excess of actual
depreciation (including any special depreciation If you had a gain on the disposition of oil, gas, or
allowance, or commercial revitalization deduction) over geothermal property placed in service before 1987, treat
depreciation figured using the straight line method. For all or part of the gain as ordinary income. Include on
this purpose, do not reduce the basis under section 50(c) line 22 of Form 4797 any depletion allowed (or allowable)
in determining the adjusted basis of the property.

Instructions for Form 4797 (2023) 11

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If you had a gain on the disposition of oil, gas, defined in section 280F(d)(4)) and the business use of the
geothermal, or other mineral properties (section 1254 property decreased to 50% or less this year, complete
property) placed in service after 1986, you must recapture column (a) of lines 33 through 35 to figure the recapture
all expenses that were deducted as intangible drilling amount.
costs, depletion, mine exploration costs, and development
costs under sections 263, 616, and 617. Column (b)
Exception. Property placed in service after 1986 and If you have listed property that you placed in service in a
acquired under a written contract entered into before prior year and the business use decreased to 50% or less
September 26, 1985, and binding at all times thereafter is this year, figure the amount to be recaptured under section
treated as placed in service before 1987. 280F(b)(2). Complete column (b), lines 33 through 35.
See Pub. 463, Travel, Gift, and Car Expenses, for more
Note. A corporation that is an integrated oil company details on recapture of excess depreciation.
completes line 28a by treating amounts amortized under
section 291(b)(2) as deductions under section 263(c). Note. If you have more than one property subject to the
recapture rules, figure the recapture amounts separately
for each property. Show these calculations on a separate
Line 28a statement and attach it to your tax return.

If the property was placed in service before 1987, enter Line 33
the total expenses after 1975 that:
• Were deducted by the taxpayer or any other person as In column (a), enter the section 179 expense deduction
intangible drilling and development costs under section you claimed when the property was placed in service. In
263(c) (except previously expensed mining costs that column (b), enter the depreciation allowable on the
were included in income upon reaching the producing property in prior tax years (plus any section 179 expense
state), and deduction you claimed when the property was placed in
• Would have been reflected in the adjusted basis of the service).
property if they had not been deducted.
Line 34
If the property was placed in service after 1986, enter In column (a), enter the depreciation that would have been
the total expenses that: allowable on the section 179 property from the year the
• Were deducted under section 263, 616, or 617 by the property was placed in service through (and including) the
taxpayer or any other person; and current year. See Pub. 946, How To Depreciate Property.
• But for such deduction, would have been included in the In column (b), enter the depreciation that would have
basis of the property; plus been allowable if the property had not been used more
• The deduction under section 611 that reduced the than 50% in a qualified business. Figure the depreciation
adjusted basis of such property. from the year it was placed in service up to (but not
If you disposed of a portion of section 1254 property or including) the current year. See Pub. 463 and Pub. 946.

an undivided interest in it, see section 1254(a)(2). Line 35
Line 29a Subtract line 34 from line 33 and enter the recapture
Use 100% if the property is disposed of less than 10 years amount as “other income” on the same form or schedule
after receipt of payments excluded from income. Use on which you took the deduction. For example, if you took
100% minus 10% for each year, or part of a year, that the the deduction on Schedule C (Form 1040), report the
property was held over 10 years after receipt of the recapture amount as other income on Schedule C (Form
excluded payments. Use zero if 20 years or more. 1040).

Line 29b Note. If you filed Schedule C or F (Form 1040) and the
property was used in both your trade or business and for
If any part of the gain shown on the production of income, the portion of the recapture
line 24 is treated as ordinary income under sections 1231 amount attributable to your trade or business is subject to
through 1254 (for example, section 1252), enter the self-employment tax. Allocate the amount on line 35 to the
smaller of (a) line 24 reduced by the part of the gain appropriate schedules.
treated as ordinary income under the other provision, or
(b) line 29a. Be sure to increase your basis in the property by the
recapture amount.
Part IV

Column (a)
If you took a section 179 expense deduction for property
placed in service after 1986 (other than listed property, as

12 Instructions for Form 4797 (2023)

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Paperwork Reduction Act Notice.                 We ask for the information on this form to carry out the Internal Revenue laws of the 
United States. You are required to give us the information. We need it to ensure that you are complying with these laws 
and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act 
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be 
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax 
returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden 
for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the 
estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers 
who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 hr., 23 min.
Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      8 hr., 20 min.
Preparing and sending the form to the IRS       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9 hr., 17 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, 
we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

Instructions for Form 4797 (2023)                                                                                                     13

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