Form 4797 is used to report the sale, exchange, or involuntary conversion of business property. This includes real estate used in a business, machinery, equipment, vehicles, and certain other depreciable business assets. The form is also used to calculate depreciation recapture and determine whether the gain or loss is treated as ordinary income or capital gain.
Use the information from your sales records, depreciation schedules, and purchase documents to complete the Form 4797 section of the software.
Who Should Complete Form 4797?
Complete this section if you sold or otherwise disposed of business property during the tax year, including:
- Business buildings and real property
- Machinery and equipment
- Vehicles used in a business
- Depreciable business assets
- Certain intangible and natural resource properties
- Property used in a trade or business that was involuntarily converted (other than casualty or theft)
Form 4797 Entry Fields
Whose form is this?
Select the taxpayer who owned the property:
- Taxpayer: The property was owned solely by the primary taxpayer.
- Spouse: The property was owned solely by the spouse.
- Joint: The property was jointly owned.
Description of Property
Enter a brief description of the asset that was sold.
Examples:
- Delivery Truck
- Office Building
- Computer Equipment
- Rental Property - Business Portion
- Manufacturing Machine
The description should clearly identify the business asset being reported.
Date Acquired
Enter the date the property was originally acquired and placed into service.
The acquisition date helps determine how long the property was held and whether the transaction is reported as a short-term or long-term disposition.
Date Sold
Enter the date the property was sold, exchanged, or otherwise disposed of.
Sales Price
Enter the gross amount received for the property.
Include:
- Cash received
- Fair market value of property received in exchange
- Any liabilities assumed by the buyer when applicable
Example:
- Business vehicle sold for $12,000 → Enter 12,000
The sales price represents the amount realized from the disposition. If you had selling expenses, reduce your sales price by the corresponding amount when making your entry in the program.
Depreciation Allowed
Enter the total depreciation deduction claimed or allowable on the asset through the date of sale.
Important: Enter the total depreciation allowed or allowable, even if all available depreciation was not actually claimed. Depreciation affects the property's adjusted basis and may result in depreciation recapture being taxed as ordinary income.
Cost or Other Basis
Enter the original cost or basis of the property before depreciation.
This is generally:
- Purchase price
- Plus acquisition costs and capital improvements
- Minus certain adjustments when applicable
Do not reduce this amount by depreciation. Enter the original cost or adjusted basis information as reflected in your records. The software uses both basis and depreciation entered to calculate the property's adjusted basis and gain or loss.
Transaction Type
Select the option that matches how long the property was held. See our article to help choose the correct type.
Program Entry
To report Form 4797, navigate to:
- Federal
- Income (Select my forms)
- Less Common Income
- Form 4797
Example
A taxpayer purchased equipment for $20,000 on 03/01/2021, claimed $8,000 of depreciation, and sold the equipment on 08/15/2025 for $15,000.
Enter:
- Description of Property: Equipment
- Date Acquired: 03/01/2021
- Date Sold: 08/15/2025
- Sales Price: 15,000
- Depreciation Allowed: 8,000
- Cost or Other Basis: 20,000
- Transaction Type: Part I - Property held more than 1 year
What if I used my main home for business?
If you used your main home for business and as your principal residence, during the 5-year period up to the date of sale, you may qualify to exclude all or part of the gain figured on Form 4797. This situation is typical for self-employed persons and independent contractors, who generate their income from home.
IRS Publication 523, provides additional information on the partial or whole gain exclusion.
Additional Information
Keep documentation supporting:
- Purchase date and cost
- Improvements made to the property
- Depreciation records
- Sales closing statements or bills of sale
- Any Forms 4562 used to claim depreciation
These records will help verify the information reported on Form 4797 and support any depreciation recapture calculations required by the IRS.