What is Form 4797, Sales of Business Property?

If you sold, exchanged, or otherwise disposed of business property during the tax year, you may need to file Form 4797, Sales of Business Property. This form is used to report gains and losses from the sale of business assets and to calculate any depreciation recapture that may apply.

Business property can include real estate, vehicles, machinery, equipment, and other assets used in a trade or business. The information you enter helps determine whether your gain or loss is taxed as ordinary income, capital gain, or a combination of both.

Use your sales records, depreciation schedules, and purchase documents to complete the Form 4797 section in the software.

Enter a short description that clearly identifies the asset sold.

Examples include:

Enter the date the property was originally purchased and placed into service.

The acquisition date helps determine the holding period and whether the transaction is reported as a short-term or long-term disposition.

Enter the gross amount you received for the property.

Include:

Enter the total depreciation deduction claimed or allowable on the asset through the date of sale.

Important: Enter the total depreciation that was allowed or allowable, even if you did not claim all available depreciation deductions.

Enter the original cost or basis of the property before depreciation.

This generally includes:

Do not reduce this amount by depreciation.

The software uses both the original basis and the depreciation entered to calculate the adjusted basis and determine the gain or loss on the sale.

Select the option that matches how long you held the property before disposing of it.

If you're unsure which transaction type to select, review our article explaining the different Form 4797 property classifications.

A taxpayer purchased equipment for $20,000 on 03/01/2021. The taxpayer claimed $8,000 of depreciation and later sold the equipment on 08/15/2025 for $15,000.

Enter the following:

If part of your main home was used for business and you later sold the property, special rules may apply.

You may qualify to exclude all or part of the gain from the sale of your principal residence if you meet the ownership and use requirements. However, depreciation claimed for business use of the home generally cannot be excluded and may be subject to depreciation recapture.

For more information, see IRS Publication 523, Selling Your Home.

Can The Operating Loss on a Sold Rental Property be Used To Offset Income?

Yes, when you sell your entire interest in a rental property, any suspended passive losses associated with that property can be used to offset ordinary income.