Instructions for Form 4797

2025

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

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 4797 and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form4797.

General Instructions

Purpose of Form

Use Form 4797 to report the following.

• The sale or exchange of:

1. Real property used in your trade or business;

2. Depreciable and amortizable tangible property used

in your trade or business (however, see Disposition of

Depreciable Property Not Used in Trade or Business,

later);

3. Oil, gas, geothermal, or other mineral properties;

and

4. Certain cost-sharing payment property under

section 126.

• 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

a trade or business or a transaction entered into for profit

(however, see Disposition of Depreciable Property Not

Used in Trade or Business, later).

Where To Make First Entry for Certain Items

Reported on This Form

(a)

Type of property

1

2

3

4

5

6

7

8

Depreciable tangible trade or business property:

a Sold or exchanged at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Sold or exchanged at a loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciable real trade or business property:

a Sold or exchanged at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Sold or exchanged at a loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Farmland held less than 10 years upon which soil or water expenses were

deducted:

a Sold at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Sold at a loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Real or tangible trade or business property which was deducted under the

de minimis safe harbor

All other farmland used in a trade or business

Disposition of cost-sharing payment property described in section 126

(b)

Held 1 year

or less

(c)

Held more

than 1 year

Part II

Part II

Part III (1245)

Part I

Part II

Part II

Part III (1250)

Part I

Part II

Part II

Part III (1252)

Part I

Part II

Part II

Part II

Part II

Part I

Part III (1255)

Cattle and horses used in a trade or business for draft, breeding, dairy, or

sporting purposes:

Held less

than 24

months

Held 24

months

or more

a

b

c

Part II

Part II

Part II

Part III (1245)

Part I

Part I

Livestock other than cattle and horses used in a trade or business for draft,

breeding, dairy, or sporting purposes:

Held less

than 12

months

Held 12

months

or more

a

b

c

Part II

Part II

Part II

Part III (1245)

Part I

Part I

Sold at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sold at a loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Raised cattle and horses sold at a gain . . . . . . . . . . . . . . . . . . . . . . . . .

Sold at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sold at a loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Raised livestock sold at a gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Jul 28, 2025

Instructions for Form 4797 (2025) Catalog Number 13087T

Department of the Treasury Internal Revenue Service www.irs.gov

• The disposition of noncapital assets (other than

inventory or property held primarily for sale to customers

in the ordinary course of your trade or business).

• The disposition of capital assets not reported on

Schedule D.

• The gain or loss (including any related recapture) for

partners and S corporation shareholders from certain

section 179 property dispositions by partnerships and S

corporations.

• The computation of recapture amounts under sections

179 and 280F(b)(2) when the business use of section 179

or listed property decreases to 50% or less.

• Gains or losses treated as ordinary gains or losses, if

you are a trader in securities or commodities and made a

mark-to-market election under section 475(f).

• Election to defer a qualified section 1231 gain (gains

derived from the sale of property used in a trade or

business) invested in a qualified opportunity fund (QOF).

Other Forms You May Have To File

• Use Form 4684, to report involuntary conversions from

casualties and thefts.

• Use Form 6252, to report the sale of property under the

installment method.

• Use Form 8824, to report exchanges of qualifying

business or investment real property for real property of a

like kind. For exchanges of real property used in a trade or

business (and other noncapital assets), enter the gain or

(loss) from Form 8824, if any, on Form 4797, line 5 or

line 16.

• If you sold property on which you claimed investment

credit, see Form 4255, and its instructions to find out if you

must recapture some or all of the credit.

• Use Form 8949, to report the sale or exchange of

capital assets not reported on another form or schedule;

gains from involuntary conversions (other than casualty or

theft) of capital assets not used in your trade or business;

and nonbusiness bad debts. However, see Disposition of

Depreciable Property Not Used in Trade or Business,

later.

• Use the applicable Schedule D, Capital Gains and

Losses, for the return you are filing to figure the overall

gain or loss from transactions reported on Form 8949 and

to report transactions you don’t have to report on Form

8949. See the Instructions for Form 8949 and the

instructions for the applicable Schedule D.

Depreciable Property and Other Property

Disposed of in the Same Transaction

If you disposed of both depreciable property and other

property (for example, a building and land) in the same

transaction and realized a gain, you must allocate the

amount realized between the two types of property based

on their respective fair market values (FMVs) to figure the

part of the gain to be recaptured as ordinary income

because of depreciation. The disposition of each type of

property is reported separately in the appropriate part of

Form 4797. For example, for property held more than 1

year, report the sale of a building in Part III and the land in

Part I.

Disposition of Depreciable Property Not Used in

Trade or Business

Generally, gain from the sale or exchange of depreciable

property not used in a trade or business but held for

investment or for use in a not-for-profit activity is capital

gain. Generally, the gain is reported on Form 8949 and

Schedule D. However, part of the gain on the sale or

exchange of the depreciable property may have to be

recaptured as ordinary income on Form 4797. Use Part III

of Form 4797 to figure the amount of ordinary income

recapture. The recapture amount is included on line 31

(and line 13) of Form 4797. See the instructions for Part III.

If the total gain for the depreciable property is more than

the recapture amount, the excess is reported on Form

8949. On Form 8949, enter “From Form 4797” in column

(a) of Part I (if the transaction is short term) or Part II (if the

transaction is long term), and skip columns (b) and (c). In

column (d), enter the excess of the total gain over the

recapture amount. Leave columns (e) through (g) blank

and complete column (h). If you invested this gain into a

QOF and intend to elect the temporary deferral of the

gain, see the Instructions for Form 8949; Form 8997, Initial

and Annual Statement of Qualified Opportunity Fund

(QOF) Investments, and its instructions; and the

instructions for the applicable Schedule D.

Special Rules

Generally, loss from the sale or exchange of

depreciable property not used in a trade or business but

held for investment or for use in a not-for-profit activity is a

capital loss. Report the loss on Form 8949 in Part I (if the

transaction is short term) or Part II (if the transaction is

long term). You can deduct capital losses up to the

amount of your capital gains. For taxpayers other than

corporations, also deduct the lower of $3,000 ($1,500 if

you are a married individual filing a separate return), or the

excess of such losses over such gains. See the

Instructions for Form 8949 and the Instructions for

Schedule D (Form 1040).

At-Risk Rules

Partial Dispositions of MACRS Property

Additional information. See the instructions for the

forms listed above for more information. Also see Pub.

544, Sales and Other Dispositions of Assets, and Pub.

550, Investment Income and Expenses.

If you report a loss on an asset used in an activity for

which you are not at risk, in whole or in part, see the

Instructions for Form 6198. Also, see Pub. 925, Passive

Activity and At-Risk Rules. Losses from passive activities

are subject first to the at-risk rules and then to the passive

activity rules.

2

You may elect to recognize a partial disposition of a

Modified Accelerated Cost Recovery System (MACRS)

asset, and report the gain, loss, or other deduction on a

timely filed, including extensions, federal tax return for the

year of the disposition. In some cases, however, you are

required to report the gain or loss on the partial disposition

of a MACRS asset (see Required partial dispositions,

later). MACRS assets include buildings (and their

structural components) and other tangible depreciable

Instructions for Form 4797 (2025)

property placed in service after 1986 that is used in a

trade or business or for the production of income.

For more information on partial dispositions of MACRS

property, see Regulations section 1.168(i)-8(d).

Elective partial dispositions. If you elect to recognize a

partial disposition of a MACRS asset, report the gain or

loss (if any) on Form 4797, Part I, II, or III, as applicable,

and include the words “Partial Disposition Election” in the

description of the partially disposed asset. See the

instructions for Parts I, II, and III. For more information on

the disposition of MACRS assets, see Regulations section

1.168(i)-8.

Required partial dispositions. Report the gain or loss

(if any) on the following partial dispositions of MACRS

assets on Form 4797, Part I, II, or III, as applicable.

• Sale of a portion of a MACRS asset.

• Involuntary conversion of a portion of a MACRS asset

other than from a casualty or theft.

• Like-kind exchange of a portion of a MACRS asset

(Form 4797, line 5 or 16).

See the instructions for lines 1b and 1c and the

instructions for Parts I, II, and III. Also, see Other Forms

You May Have To File, earlier.

Disposition of Assets That Constitute a Trade or

Business

If you sell a group of assets that make up a trade or

business and the buyer's basis in the assets are

determined wholly by the amount paid for the assets, both

you and the buyer must generally allocate the total sales

price to the assets transferred. File Form 8594, Asset

Acquisition Statement, to report the sale. See the

Instructions for Form 8594. Also, see Pub. 544 for more

details on the sale of business assets.

Installment Sales

If you sold property at a gain and you will receive a

payment in a tax year after the year of sale, you must

generally report the sale on the installment method unless

you elect not to do so.

Use Form 6252 to report the sale on the installment

method. Also use Form 6252 to report any payment

received during your 2025 tax year from a sale made in an

earlier year that you reported on the installment method.

Enter any gain from the installment sale on Form 4797,

line 4 or line 15, as applicable. See the instructions for

Form 6252.

To elect out of the installment method, report the full

amount of the gain on a timely filed return (including

extensions). If you timely filed your tax return without

making the election, you can still make the election by

filing an amended return within 6 months of the due date

of your return (excluding extensions). Enter “Filed

pursuant to section 301.9100-2” at the top of the amended

return.

For a detailed discussion of installment sales, see Pub.

537.

Instructions for Form 4797 (2025)

Traders Who Made a

Mark-to-Market Election

A trader in securities or commodities may elect under

section 475(f) to use the mark-to-market method to

account for securities or commodities held in connection

with a trading business. Under this method of accounting,

any security or commodity held at the end of the tax year

is treated as sold at its FMV on the last business day of

that year.

Unless you are a new taxpayer, the election must be

made by the due date (not including extensions) of the tax

return for the year prior to the year for which the election

becomes effective.

If you are a trader in securities or commodities with a

mark-to-market election under section 475(f) in effect for

the tax year, the following special rules apply.

• Gains and losses from all securities or commodities

held in connection with your trading business (including

those marked to market) are treated as ordinary income

and losses, instead of capital gains and losses. As a

result, the lower capital gain tax rates and the limitation on

capital losses don’t apply.

• The gain or loss from each security or commodity held

in connection with your trading business (including those

marked to market) is reported on Form 4797, Part II,

line 10. See Securities or Commodities Held by a Trader

Who Made a Mark-to-Market Election in the instructions

for line 10.

• The wash sale rule does not apply to securities or

commodities held in connection with your trading

business.

For details on the mark-to-market election for traders

and how to make the election, see section 475(f). Also

see Pub. 550.

Sale of Home Used for Business

If you sold property that was your home and you also used

it for business, you may need to use Form 4797 to report

the sale of the part used for business (or the sale of the

entire property if used entirely for business). Gain or loss

on the sale of the home may be a capital gain or loss or an

ordinary gain or loss. Any gain on the personal part of the

property is a capital gain. You cannot deduct a loss on the

personal part. Any gain or loss on the part of the home

used for business is an ordinary gain or loss, as

applicable, reportable on Form 4797. Any gain or loss on

the part producing income for which the underlying activity

does not rise to the level of a trade or business is a capital

gain or loss, as applicable. See Disposition of Depreciable

Property Not Used in Trade or Business, earlier. For more

details, see Pub. 544. Also, see Pub. 523, Selling Your

Home.

Exclusion of gain on sale of home used for business.

You may be able to exclude part or all of the gain figured

on Form 4797 if the property sold was used for business

and was also owned and used as your principal residence

during the 5-year period ending on the date of the sale.

During that 5-year period, you must have owned and used

the property as your personal residence for 2 or more

years. However, the exclusion may not apply to the part of

the gain that is allocated to any period after December 31,

3

2008, during which the property was not used as your

principal residence.

If the property was held more than 1 year after you

converted it to business use, complete Part III to figure the

amount of the gain. Do not take the exclusion into account

when figuring the gain on line 24. If line 22 includes

depreciation for periods after May 6, 1997, you cannot

exclude gain to the extent of that depreciation. On Part I,

line 2, enter “Section 121 exclusion,” and enter the amount

of the exclusion as a (loss) in column (g).

If the property was held for 1 year or less after you

converted it to business use, report the sale and the

amount of the exclusion, if any, in a similar manner on Part

II, line 10.

For details and exceptions, including how to figure gain

on the sale of a home used for business and the amount

of the exclusion, see section 121 and Pub. 523.

Involuntary Conversion of Property

You may not have to pay tax on a gain from an involuntary

or compulsory conversion of property. See Pub. 544 for

details.

Passive Loss Limitations

If you have an overall loss from passive activities and you

report a loss on an asset used in a passive activity, use

Form 8582, Passive Activity Loss Limitations, or Form

8810, Corporate Passive Activity Loss and Credit

Limitations, as applicable, to see how much loss is

allowed before entering it on Form 4797.

You cannot claim unused passive activity credits when

you dispose of your interest in an activity. However, if you

dispose of your entire interest in an activity, you may elect

to increase the basis of the credit property by the original

basis reduction of the property to the extent that the credit

has not been allowed because of the passive activity

rules. Make the election on Form 8582-CR, Passive

Activity Credit Limitations, or Form 8810, as applicable.

No basis adjustment may be elected on a partial

disposition of your interest in an activity.

Recapture of Preproductive Expenses

If you elect under section 263A(d)(3) not to use the

uniform capitalization rules of section 263A, any plant that

you produce is treated as section 1245 property. For

dispositions of plants reportable on Form 4797, enter the

recapture amount taxed as ordinary income on Part III,

line 22. See Disposition of plants in chapter 9 of Pub. 225,

Farmer's Tax Guide, for details.

Section 197(f)(9)(B)(ii) Election

If you made the election under section 197(f)(9)(B)(ii) to

recognize gain on the disposition of a section 197

intangible and to pay a tax on that gain at the highest tax

rate, include the additional tax on Form 1040, line 16 (or

the appropriate line of other income tax returns). Check

box 3 and enter “197” and the tax in the space next to that

box. The additional tax is the amount that, when added to

any other income tax on the gain, equals the gain

multiplied by the highest tax rate.

4

Deferral of Gain Invested in a Qualified

Opportunity Fund (QOF)

If you realized a gain from an actual or deemed sale or

exchange with an unrelated person and, during the

180-day period beginning on the date the gain is realized,

you invested any portion of the gain in a QOF, then you

may elect to temporarily defer such eligible capital gain

that would otherwise be includible in the current tax year’s

income. If you make the election, the eligible capital gain

is included in taxable income only to the extent, if any, the

amount of realized gain exceeds the aggregate amount

invested in a QOF during the 180-day period.

A taxpayer may elect to temporarily defer a qualified

section 1231 gain (gains derived from the sale of property

used in a trade or business, including gains from

installment sales and like-kind exchanges) by investing

the amount of the eligible gain into a QOF. Qualified

section 1231 gains are eligible to be invested into a QOF

to the extent the section 1231 gain exceeds any amount

that is treated as ordinary income due to depreciation

recapture as required by sections 1245 and 1250.

Sections 1245 and 1250 gain may not be deferred into a

QOF. For more information, see section 1400Z-2 and the

related regulations.

How to report. Report the gain including any

depreciation recapture required by sections 1245 and

1250 as it would otherwise be reported if you were not

making the election. Then, on Form 4797, line 2, report

the qualified section 1231 gains you are electing to defer

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

4797, line 2, use the line directly below the line on which

you reported the sale. In column (a), identify the section

1231 gains invested into a QOF as “QOF investment to

Form 8949”; columns (b), (c), (d), (e), and (f) will remain

blank. Report the amount of section 1231 gains invested

into a QOF as a negative amount (in parentheses) in

column (g).

For example, if a taxpayer realizes $300,000 of section

1231 gains in a tax year but chooses to defer $75,000 of

section 1231 gains by investing those gains into a QOF

within 180 days of the date of sale, the taxpayer would

enter “QOF investment to Form 8949” in column (a) and

enter ($75,000) in column (g).

Similarly, if the taxpayer disposed of an investment in a

QOF during the tax year triggering recognition of section

1231 deferred gains, the taxpayer should report the gain

on a separate row in line 2, enter “QOF inclusion from

section 1231 gains” in column (a), and report the $75,000

of previously deferred and currently recognizable section

1231 gains as a positive number in column (g).

Make the election for the deferred amount invested in a

QOF on Form 8949. See the Instructions for Form 8949. If

you held a qualified investment in a QOF at any time

during the year, you must file your return with Form 8997

attached. See the instructions for Form 8997. For more

information about QOFs, see IRS.gov/Ozfaqs.

Exclusion of Gain From Sale of DC Zone Assets

If you sold or exchanged a District of Columbia Enterprise

Zone (DC Zone) asset that you acquired after 1997 and

Instructions for Form 4797 (2025)

before 2012, and held for more than 5 years, you may be

able to exclude the amount of “qualified capital gain.” This

exclusion applies to an interest in, or property of, certain

businesses operating in the District of Columbia. See

section 1400B (as in effect before its repeal) for more

details and special rules. Also see Pub. 544.

How to report. If applicable, report the entire gain

realized from the sale or exchange as you otherwise

would without regard to the exclusion. To report the

exclusion, enter “DC Zone Asset Exclusion” on Form

4797, line 2, column (a), and enter as a (loss) in column

(g) the amount of the exclusion that offsets the gain

reported on Part I, line 6.

Any unrecaptured section 1250 gain is not

qualified capital gain. Identify the amount of gain

CAUTION that is unrecaptured section 1250 gain and report

it on the Schedule D for the return you are filing.

!

Exclusion of Gain From Qualified Community

Assets

If you sold or exchanged a qualified community asset

acquired after 2001 and before 2010, you may be able to

exclude the “qualified capital gain.” The qualified gain is,

generally, any gain recognized in a trade or business that

you would otherwise include on Form 4797, Part I. This

exclusion also applies to an interest in, or property of,

certain renewal community businesses. See sections

1400F(c) and (d) (as in effect before their repeal) for

special rules and limitations.

How to report. If applicable, report the entire gain

realized from the sale or exchange as you otherwise

would without regard to the exclusion. To report the

exclusion, enter “Qualified Community Asset Exclusion”

on Form 4797, line 2, column (a), and enter as a (loss) in

column (g) the amount of the exclusion that offsets the

gain reported on Part I, line 6.

Specific Instructions

Note. To show losses, enclose figures in (parentheses).

If you disposed of property you acquired by inheritance

from someone who died, enter “INHERITED” in column

(b) instead of the date you acquired the property. Also

report the sale or exchange that way if you inherited the

property from someone who died in 2010 and the

executor of the decedent's estate did not elect under

section 1022 to file Form 8939.

Disposition by a Partnership or S

Corporation of Section 179 Property

Partners and S corporation shareholders. If you

received a Schedule K-1 from a partnership or S

corporation reporting the sale, exchange, or other

disposition of property for which a section 179 expense

deduction was previously claimed and passed through to

its partners or shareholders, you must report your share of

the transaction on Form 4797, 4684, 6252, or 8824

(whether or not you were a partner or shareholder at the

time the section 179 deduction was claimed).

Instructions for Form 4797 (2025)

Use the worksheet, later, to figure the amount to report

on Form 4797, 4684, 6252, or 8824, and to figure any

reduction in your carryforward of the unused section 179

expense deduction. The partnership or S corporation

must provide the following information on Schedule K-1 for

the transaction.

• Description of the property.

• Date the property was acquired and placed in service.

• Date of the sale or other disposition of the property.

• Your share of the gross sales price or amount realized.

Enter this amount on line 1 of the worksheet.

• Your share of the cost or other basis plus the expense

of sale. Enter this amount on line 2 of the worksheet.

• Your share of the depreciation allowed or allowable, but

excluding the section 179 expense deduction. Enter this

amount on line 3a of the worksheet.

• Your share of the section 179 expense deduction

passed through for the property and the partnership's or S

corporation's tax year(s) in which the amount was passed

through. Enter on line 3b of the worksheet your share of

the total amount of the section 179 expense deduction

passed through for the property (even if you were not a

partner or shareholder for the tax year in which it was

passed through or you did not deduct all or part of the

section 179 expense because of the dollar or taxable

income limitations). The tax year(s) in which the amount

was passed through is provided so you can determine the

amount of unused carryover section 179 expense (if any)

for the property to report on line 3c.

• If the disposition is due to a casualty or theft, a

statement indicating so, and any additional information

you need to complete Form 4684.

• If the disposition was an installment sale made during

the partnership's or S corporation's tax year reported

using the installment method, any information you need to

complete Form 6252. The partnership or S corporation

must also separately report your share of all payments

received for the property in the following tax years.

• If the disposition was a disposition of property given up

in an exchange involving like-kind property made during

the partnership's or S corporation's tax year, any

information you need to complete Form 8824.

If you have a carryforward of unused section 179

expense deduction that includes section 179 expense

deduction previously passed through to you for the

disposed asset, you must reduce your carryforward by

your share of the section 179 expense deduction shown

on Schedule K-1 (or the amount attributable to that

property included in your carryforward amount).

Note. Partnerships and S corporations do not report

these transactions on Form 4797, 4684, 6252, or 8824.

Instead, they provide their partners and shareholders the

information they need to report the transactions. See the

Instructions for Form 1065 or the Instructions for Form

1120-S for details on the information that must be

reported on Schedule K-1.

Line 1

Line 1a. Enter on line 1a the total gross proceeds from:

• Sales or exchanges of real estate reported to you for

2025 on Form(s) 1099-S (or substitute statement(s)) that

you are including on line 2, 10, or 20; and

5

• Sales of securities or commodities reported to you for

2025 on Form(s) 1099-B (or substitute statement(s)) that

you are including on line 10 because you are a trader with

a mark-to-market election under section 475(f) in effect for

the tax year. See Traders Who Made a Mark-to-Market

Election, earlier, and the instructions for line 10, later.

Line 1b. Enter on line 1b the total amount of gain that you

are including on lines 2, 10, and 24 due to the partial

dispositions of MACRS assets. See Partial Dispositions of

MACRS Property, earlier.

Line 1c. Enter on line 1c the total amount of loss that you

are including on lines 2 and 10 due to partial dispositions

of MACRS assets. See Partial Dispositions of MACRS

Property, earlier.

Part I

Use Part I to report section 1231 transactions that are not

required to be reported in Part III.

Section 1231 transactions. The following are section

1231 transactions.

• 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

after you received the property and include the day you

disposed of it.

• Cutting of timber that the taxpayer elects to treat as a

sale or exchange under section 631(a).

• Disposal of timber with a retained economic interest

that is treated as a sale, or an outright sale of timber,

under section 631(b).

• Disposal of coal (including lignite) or domestic iron ore

with a retained economic interest that is treated as a sale

under section 631(c).

• Sales or exchanges of cattle and horses, regardless of

age, used in a trade or business for draft, breeding, dairy,

or sporting purposes and held for 24 months or more from

acquisition date.

• Sales or exchanges of livestock other than cattle and

horses, regardless of age, used in a trade or business for

draft, breeding, dairy, or sporting purposes and held for 12

months or more from acquisition date.

Note. Livestock does not include poultry, chickens,

turkeys, pigeons, geese, other birds, fish, frogs, reptiles,

etc.

• Sales or exchanges of certain unharvested crops. See

section 1231(b)(4).

• Involuntary conversions of trade or business property or

capital assets held more than 1 year in connection with a

trade or business or a transaction entered into for profit.

These conversions may result from (a) part or total

destruction, (b) theft or seizure, or (c) requisition or

condemnation (whether threatened or carried out).

However, if any recognized losses were from involuntary

conversions from fire, storm, shipwreck, or other casualty

or from theft and the losses exceed the recognized gains

from the conversions, do not include any gains or losses

from such conversions when figuring your net section

1231 gains and section 1231 losses.

Transactions to which section 1231 does not apply.

Section 1231 transactions do not include sales or

exchanges of:

6

• Inventory or property held primarily for sale to

customers;

• Patents; inventions; models or designs (whether or not

patented); secret formulas or processes; copyrights;

literary, musical, or artistic compositions; letters or

memoranda; or similar property (a) created by your

personal efforts, (b) prepared or produced for you (in the

case of letters, memoranda, or similar property), or (c)

received from someone who created them or for whom

they were created, as mentioned in (a) or (b), in a way that

entitled you to the basis of the previous owner (such as by

gift); or

• U.S. Government publications, including the

Congressional Record, that you:

1. Received from the government other than by

purchase at the normal sales price; or

2. Received from someone who had received it from

the government, other than by purchase at the normal

sales price, in a way that entitled you to the previous

owner’s basis (such as by gift).

Line 7

Partners and S corporation shareholders receive a

Schedule K-1 (Form 1065 or Form 1120-S), which

includes amounts that must be reported on Form 4797.

Following the Instructions for Schedule K-1, enter any

amounts from your Schedule K-1 (Form 1120-S), box 9, or

Schedule K-1 (Form 1065), box 10, in Part I of Form 4797.

If the amount from line 7 is a gain and you have

nonrecaptured section 1231 losses from prior years, see

the instructions for line 8, later. If the amount from line 7 is

a gain and you did not have nonrecaptured section 1231

losses from prior years, enter the gain from line 7 as a

long-term capital gain on the Schedule D for the return you

are filing.

Line 8

Your nonrecaptured section 1231 losses are your net

section 1231 losses deducted during the 5 preceding tax

years that have not yet been applied against any net

section 1231 gain to determine how much net section

1231 gain is treated as ordinary income under this rule.

You had a net section 1231 loss if section 1231 losses

exceeded section 1231 gains. Gains are included only to

the extent taken into account in figuring gross income.

Losses are included only to the extent taken into account

in figuring taxable income except that the limitation on

capital losses does not apply.

Your net section 1231 gain on line 7 is treated as

ordinary income to the extent of your nonrecaptured

section 1231 losses. See the example below.

Example. You had net section 1231 losses of $4,000

and $6,000 in 2020 and 2021, respectively, and net

section 1231 gains of $3,000 and $2,000 in 2024 and

2025, respectively. The 2025 net section 1231 gain of

$2,000 is entered on line 7 and the nonrecaptured net

section 1231 losses of $7,000 ($10,000 net section 1231

losses minus the $3,000 that was applied against the

2025 net section 1231 gain) are entered on line 8. The

entire $2,000 net section 1231 gain on line 7 is treated as

ordinary income and is entered on line 12 of Form 4797.

Instructions for Form 4797 (2025)

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.

For recordkeeping purposes, the $4,000 loss from 2020 is

all recaptured ($3,000 in 2024 and $1,000 in 2025), and

you have $5,000 of section 1231 losses from 2021 left to

recapture ($6,000 minus the $1,000 recaptured this year).

Line 9

in 2025. If line 9 is more than zero, you have recaptured all

of your net section 1231 losses from prior years.

If line 9 is more than zero, enter the amount from line 8

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.

For recordkeeping purposes, if line 9 is zero, the amount

on line 7 is the amount of net section 1231 loss recaptured

Instructions for Form 4797 (2025)

7

Part II

If a transaction is not reportable in Part I or Part III and the

property is not a capital asset reportable on Schedule D,

report the transaction in Part II.

If you received ordinary income from a sale or other

disposition of your interest in a partnership, see Pub. 541,

Partnerships.

Line 10

Report on line 10 ordinary gains and losses, not included

on lines 11 through 16, including gains and losses from

property held 1 year or less.

If you receive ordinary income from a sale or other

disposition of property and deducted the cost of the

property under the tangible property de minimis safe

harbor, report the income on line 10.

Deduct the loss from a qualifying abandonment of

business or investment property on line 10. See

Abandonments in Pub. 544 for more information.

Gain or Loss From Certain Preferred Stock

Gain or loss recognized by any “applicable financial

institution” from the sale or exchange of "any applicable

preferred stock" is ordinary income or loss. An applicable

financial institution includes:

• A financial institution defined in section 582(c)(2), and

• A depository institution holding company defined in

section 3(w)(1) of the Federal Deposit Insurance Act.

Also, for this purpose, “applicable preferred stock” is

preferred stock of the Federal National Mortgage

Association (Fannie Mae), or the Federal Home Loan

Mortgage Corporation (Freddie Mac) that was:

• Held by the applicable financial institution on

September 6, 2008; or

• Sold or exchanged by the applicable financial institution

after December 31, 2007, and before September 7, 2008.

In the case of a sale or exchange of applicable

preferred stock after September 6, 2008, by a taxpayer

that held such preferred stock on September 6, 2008,

these provisions apply only where the taxpayer was an

applicable financial institution at all times during the period

beginning on September 6, 2008, and ending on the date

of the sale or exchange of the applicable preferred stock.

Therefore, any Fannie Mae or Freddie Mac preferred stock

held by a taxpayer that was not an applicable financial

institution on September 6, 2008, is not applicable

preferred stock (even if such taxpayer subsequently

became an applicable financial institution).

For guidance on preferred stock held indirectly by

applicable financial institutions through partnerships and

subsidiaries, see Rev. Proc. 2008-64, 2008-47 I.R.B.

1195, available at IRS.gov/irb/2008-47_IRB/ar12.html.

Deferred Gain From Qualifying Electric

Transmission Transaction

If you sold or exchanged qualifying electric transmission

property before January 1, 2008 (before January 1, 2021,

8

for a qualified electric utility), and elected to defer the

realized gain, the deferred gain is recognized ratably over

the 8-year period that began with the tax year that

includes the date of the disposition. See section 451(k) for

more information on making the election for qualifying

transactions.

Include the applicable portion of the deferred gain for

the current tax year on line 10. Enter “Deferred gain under

section 451(k)” in column (a) and 1/8 of the deferred gain

in column (g).

Securities or Commodities Held by a Trader Who

Made a Mark-to-Market Election

Report on line 10 all gains and losses from sales and

dispositions of securities or commodities held in

connection with your trading business, including gains and

losses from marking to market securities and commodities

held at the end of the tax year (see Traders Who Made a

Mark-to-Market Election, earlier). Attach to your tax return

a statement, using the same format as line 10, showing

the details of each transaction. Separately show and

identify securities or commodities held and marked to

market at the end of the year. On line 10, enter

“Trader—see attached” in column (a) and the totals from

the statement in columns (d), (f), and (g). Also, see the

instructions for line 1, earlier.

Small Business Investment Company Stock

Report on line 10 ordinary losses from the sale or

exchange (including worthlessness) of stock in a small

business investment company operating under the Small

Business Investment Act of 1958. See

section 1242.

Also attach a statement that includes the name and

address of the small business investment company and, if

applicable, the reason the stock is worthless and the

approximate date it became worthless.

Section 1244 (Small Business) Stock

Individuals report ordinary losses from the sale or

exchange (including worthlessness) of section 1244

(small business) stock on line 10.

The maximum amount that may be treated as an

ordinary loss on Form 4797 is $50,000 ($100,000 if

married filing jointly). Special rules may limit the amount of

your ordinary loss if (a) you received section 1244 stock in

exchange for property with a basis in excess of its FMV, or

(b) your stock basis increased because of contributions to

capital or otherwise. See Pub. 550 for more details,

including information on what is section 1244 (small

business) stock.

Attach a computation of the loss from the sale or

exchange of section 1244 property. On line 10, enter

“Losses on Section 1244 (Small Business Stock)” in

column (a), and enter the allowable loss in column (g).

Report on Schedule D losses in excess of the maximum

Instructions for Form 4797 (2025)

amount that may be treated as an ordinary loss (and all

gains) from the sale or exchange of section 1244 stock.

realized. For section 1255 property disposed of in any

other way, enter the FMV.

Keep adequate records to distinguish section 1244

stock from any other stock owned in the same

corporation.

Line 21

Line 18a

You must complete this line if there is a gain on Form

4797, line 3; a loss on Form 4797, line 11; and a loss on

Form 4684, line 35, column (b)(ii). Enter on this line the

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

smaller, treat both losses as positive numbers. Enter the

loss from income-producing property on Schedule A

(Form 1040), line 16. Identify it as from “Form 4797,

line 18a.” Do not include any loss from property used as

an employee.

Part III

Partners and shareholders reporting a disposition

TIP of section 179 property which was separately

reported to you on Schedule K-1 (Form 1065 or

1120-S), see Partners and S corporation shareholders at

the beginning of the Specific Instructions, earlier.

Generally, for property held 1 year or less, do not

complete Part III; instead, use Part II. For exceptions, see

the chart Where To Make First Entry for Certain Items

Reported on This Form, earlier.

Use Part III to figure recapture of depreciation and other

items that must be reported as ordinary income on the

disposition of certain property. Complete lines 19 through

24 to determine the gain on the disposition of the property.

If you have more than four properties to report, use

additional forms. For more details on depreciation

recapture, see Pub. 544.

If the property was sold on the installment sale basis,

see the instructions for Form 6252 before completing Part

III. Also, if you have both installment sales and

noninstallment sales, you may want to use separate

Forms 4797, Part III, for the installment sales and the

noninstallment sales.

Note. If you sold or otherwise disposed of property for

which you elected to treat as an expense the costs of

certain real property, special rules apply. See section 179.

For special rules for determining gain or loss and

determining if the basis of the property is treated as

section 1245 or section 1250 property, see Pub. 544.

Line 20

The gross sales price includes money, the FMV of other

property received, and any existing mortgage or other

debt the buyer assumes or takes the property subject to.

For casualty or theft gains, include insurance or other

reimbursement you received or expect to receive for each

item. Include on this line your insurance coverage,

whether or not you are submitting a claim for

reimbursement.

For section 1255 property disposed of in a sale,

exchange, or involuntary conversion, enter the amount

Instructions for Form 4797 (2025)

Reduce the cost or other basis of the property by the

amount of any enhanced oil recovery credit or disabled

access credit. However, do not adjust the cost or other

basis for any of the items taken into account on line 22.

Line 22

Complete the following steps to figure the amount to enter

on line 22.

Step 1. Add amounts such as the following.

• Deductions allowed or allowable for depreciation

(including any special depreciation allowance (see the

Instructions for Form 4562)), amortization, depletion, or

preproductive expenses (see Disposition of plants in

chapter 9 of Pub. 225).

• The section 179 expense deduction.

• The commercial revitalization deduction for buildings

placed in service before 2010.

• The downward basis adjustment under section 50(c) (or

the corresponding provision of prior law).

• The deduction for qualified clean-fuel vehicle property

or refueling property.

• Deductions claimed under section 190, 193, or 1253(d)

(2) or (3) (as in effect before the enactment of P.L.

103-66).

• The basis reduction for any qualified plug-in electric or

qualified electric vehicle credit.

• The basis reduction for the employer-provided childcare

facility credit.

• Any applicable deduction for qualified energy efficient

commercial building property. See section 179D.

• The basis reduction for the alternative motor vehicle

credit.

• Any applicable basis reduction for the alternative fuel

vehicle refueling property credit.

• Any applicable basis adjustment for advanced

manufacturing investment credit property. See section

48D(d)(5).

Step 2. From the Step 1 total, subtract amounts such as

the following.

• Any investment credit recapture amount if the basis of

the property was reduced in the tax year the property was

placed in service under section 50(c)(1) (or the

corresponding provision of prior law). See section 50(c)(2)

(or the corresponding provision of prior law).

• Any section 179 or 280F(b)(2) recapture amount

included in gross income in a prior tax year because the

business use of the property decreased to 50% or less.

• Any qualified clean-fuel vehicle property or refueling

property deduction you were required to recapture.

• Any basis increase for qualified plug-in electric or

qualified electric vehicle credit recapture.

• Any basis increase for recapture of the

employer-provided childcare facility credit.

• Any basis increase for recapture of the alternative motor

vehicle credit.

• Any basis increase for recapture of the alternative fuel

vehicle refueling property credit.

• Any qualified disaster expense recapture.

9

• Any applicable recapture of the advanced

manufacturing investment credit.

For more information on amounts recaptured as

depreciation allowed or allowable, see chapter 3 of Pub.

544.

You may have to include depreciation allowed or

allowable on another asset (and refigure the basis amount

for line 21) if you use its adjusted basis in determining the

adjusted basis of the property described on line 19.

Line 23

For section 1255 property, enter the adjusted basis of the

section 126 property disposed of.

Line 25

Section 1245 property. Section 1245 property is

property that is depreciable (or amortizable or treated as

amortizable under, for example, section 181, 185

(repealed), 197, or 1253(d)(2) or (3) (as in effect before

the enactment of P.L. 103-66)) and is one of the following.

• Personal property.

• Elevators and escalators placed in service before 1987.

• Real property (other than property described under

tangible real property, later) adjusted for the following.

1. Amortization of certified pollution control facilities.

2. The section 179 expense deduction.

3. Deduction for clean-fuel vehicles and certain

refueling property.

4. Deduction for capital costs incurred in complying

with Environmental Protection Agency sulfur regulations.

5. Deduction for certain qualified refinery property, if in

effect before the repeal by the Tax Increase Prevention Act

of 2014. (Repealed by P.L. 113-295, section 221(a)(34)

(A), except with regards to deductions made prior to

December 19, 2014.)

6. Any applicable deduction for qualified energy

efficient commercial building property. See section 179D.

7. Deduction for election to expense qualified

advanced mine safety equipment property.

8. Amortization of railroad grading and tunnel bores if

in effect before the repeal by the Revenue Reconciliation

Act of 1990. (Repealed by P.L. 99-514, Tax Reform Act of

1986, section 242(a).)

9. Certain expenditures for childcare facilities if in

effect before the repeal by P.L. 101-508, section 11801(a)

(13). (Repealed by P.L. 101-508, Omnibus Budget

Reconciliation Act of 1990, section 11801(a)(13), except

with regards to deductions made prior to November 5,

1990.)

10. Expenditures to remove architectural and

transportation barriers to the handicapped and elderly.

11. Deduction for qualified tertiary injectant expenses.

12. Certain reforestation expenditures.

• Tangible real property (except buildings and their

structural components) if it is used in any of the following

ways.

1. As an integral part of manufacturing, production, or

extraction, or of furnishing transportation,

communications, or certain public utility services.

10

2. As a research facility in these activities.

3. For the bulk storage of fungible commodities

(including commodities in a liquid or gaseous state) used

in these activities.

• A single purpose agricultural or horticultural structure

(as defined in section 168(i)(13)).

• A storage facility (not including a building or its

structural components) used in connection with the

distribution of petroleum or any primary petroleum

product.

• Any railroad grading or tunnel bore (as defined in

section 168(e)(4)).

Exceptions and limits. Special rules apply to the

following.

• Gifts.

• Transfers at death.

• Certain tax-free transactions.

• Certain like-kind exchanges, involuntary conversions,

etc.

• Property distributed by a partnership to a partner.

• Transfers to tax-exempt organizations where the

property will be used in an unrelated business.

• Timber property.

• Dispositions of amortizable section 197 intangibles.

For more information, see section 1245(b). Also, see Pub.

544.

Line 26

Section 1250 property. Section 1250 property is

depreciable real property (other than section 1245

property). Generally, section 1250 recapture applies if you

used an accelerated depreciation method or you claimed

any special depreciation allowance, or the commercial

revitalization deduction.

Section 1250 recapture does not apply to dispositions

of the following MACRS property placed in service after

1986 (or after July 31, 1986, if elected). You are not

required to calculate additional depreciation for these

properties on line 26.

• 27.5-year (30- or 40-year, if elected or required)

residential rental property (except for 27.5-year qualified

New York Liberty Zone property acquired after September

10, 2001).

• 22-, 31.5-, or 39-year (or 40-year, if elected or required)

nonresidential real property (except for 39-year qualified

New York Liberty Zone property acquired after September

10, 2001, and property for which you elected to claim a

commercial revitalization deduction).

ACRS property. Real property depreciable under ACRS

(pre-1987 rules) is subject to recapture under section

1245, except for the following, which are treated as

section 1250 property.

• 15-, 18-, or 19-year real property and low-income

housing that is residential rental property.

• 15-, 18-, or 19-year real property and low-income

housing that is used mostly outside the United States.

• 15-, 18-, or 19-year real property and low-income

housing for which a straight line election was made.

• Low-income rental housing described in clause (i), (ii),

(iii), or (iv) of section 1250(a)(1)(B). See the instructions

for line 26b, later.

Instructions for Form 4797 (2025)

Exceptions and limits. See section 1250(d) for

exceptions and limits involving the following.

• Gifts.

• Transfers at death.

• Certain tax-free transactions.

• Certain like-kind exchanges, involuntary conversions,

etc.

• Property distributed by a partnership to a partner.

• Disposition of qualified low-income housing.

• Transfers of property to tax-exempt organizations if the

property will be used in an unrelated business.

• Dispositions of property as a result of foreclosure

proceedings.

Special rules. Special rules apply in the following cases.

• For additional depreciation attributable to rehabilitation

expenditures, see section 1250(b)(4).

• If substantial improvements have been made, see

section 1250(f).

Line 26a

Enter the additional depreciation for the period after 1975.

Additional depreciation is the excess of actual

depreciation (including any special depreciation

allowance, or commercial revitalization deduction) over

depreciation figured using the straight line method. For

this purpose, do not reduce the basis under section 50(c)

(1) (or the corresponding provision of prior law) to figure

straight line depreciation. Also, if you claimed a

commercial revitalization deduction, figure straight line

depreciation using the property's applicable recovery

period under section 168.

Line 26b

Generally, use 100% as the percentage for this line.

However, for low-income rental housing described in

clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B), see that

section for the percentage to use.

Line 26d

Enter the additional depreciation after 1969 and before

1976. If straight line depreciation exceeds the actual

depreciation for the period after 1975, reduce line 26d by

the excess. Do not enter less than zero on line 26d.

Line 26f

The amount the corporation treats as ordinary income

under section 291 is 20% of the excess, if any, of the

amount that would be treated as ordinary income if such

property were section 1245 property, over the amount

treated as ordinary income under section 1250. If the

corporation used the straight line method of depreciation,

the ordinary income under section 291 is 20% of the

amount figured under section 1245.

Line 27

Partnerships skip this section. Partners must enter on the

applicable lines of Part III amounts subject to section 1252

according to instructions from the partnership.

Instructions for Form 4797 (2025)

You may have ordinary income on the disposition of

certain farmland held more than 1 year but less than 10

years.

See section 1252 to determine if there is ordinary

income on the disposition of certain farmland for which

deductions were allowed under section 175 (relating to

soil and water conservation).

Gain from disposition of certain farmland is subject to

ordinary income rules under section 1252 before the

application of section 1231 (Part I).

Enter 100% of line 27a on line 27b except as follows.

• 80% if the farmland was disposed of within the 6th year

after it was acquired.

• 60% if disposed of within the 7th year.

• 40% if disposed of within the 8th year.

• 20% if disposed of within the 9th year.

Skip line 27 if you dispose of such farmland during the

10th or later year after you acquired it.

Line 28

If you had a gain on the disposition of oil, gas, or

geothermal property placed in service before 1987, treat

all or part of the gain as ordinary income. Include on Form

4797, line 22, any depletion allowed (or allowable) in

determining the adjusted basis of the property.

If you had a gain on the disposition of oil, gas,

geothermal, or other mineral properties (section 1254

property) placed in service after 1986, you must recapture

all expenses that were deducted as intangible drilling

costs, depletion, mine exploration costs, and development

costs under sections 263, 616, and 617.

Exception. Property placed in service after 1986 and

acquired under a written contract entered into before

September 26, 1985, and binding at all times thereafter is

treated as placed in service before 1987.

Note. A corporation that is an integrated oil company

completes line 28a by treating amounts amortized under

section 291(b)(2) as deductions under section 263(c).

Line 28a

If the property was placed in service before 1987, enter

the total expenses after 1975 that:

• Were deducted by the taxpayer or any other person as

intangible drilling and development costs under section

263(c) (except previously expensed mining costs that

were included in income upon reaching the producing

state), and

• Would have been reflected in the adjusted basis of the

property if they had not been deducted.

If the property was placed in service after 1986, enter

the total expenses that:

• Were deducted under section 263, 616, or 617 by the

taxpayer or any other person; and

• But for such deduction, would have been included in the

basis of the property; plus

• The deduction under section 611 that reduced the

adjusted basis of such property.

11

If you disposed of a portion of section 1254 property or

an undivided interest in it, see section 1254(a)(2).

Line 29a

Use 100% if the property is disposed of less than 10 years

after receipt of payments excluded from income. Use

100% minus 10% for each year, or part of a year, that the

property was held over 10 years after receipt of the

excluded payments. Use zero if 20 years or more.

Line 29b

If any part of the gain shown on line 24 is treated as

ordinary income under sections 1231 through 1254 (for

example, section 1252), enter the smaller of (a) line 24

reduced by the part of the gain treated as ordinary income

under the other provision, or (b) line 29a.

Part IV

Column (a)

If you took a section 179 expense deduction for property

placed in service after 1986 (other than listed property, as

defined in section 280F(d)(4)) and the business use of the

property decreased to 50% or less this year, complete

column (a) of lines 33 through 35 to figure the recapture

amount.

Column (b)

If you have listed property that you placed in service in a

prior year and the business use decreased to 50% or less

this year, figure the amount to be recaptured under section

280F(b)(2). Complete column (b), lines 33 through 35.

See Pub. 463, Travel, Gift, and Car Expenses, for more

details on recapture of excess depreciation.

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

statement and attach it to your tax return.

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Line 33

In column (a), enter the section 179 expense deduction

you claimed when the property was placed in service. In

column (b), enter the depreciation allowable on the

property in prior tax years (plus any section 179 expense

deduction you claimed when the property was placed in

service).

Line 34

In column (a), enter the depreciation that would have been

allowable on the section 179 property from the year the

property was placed in service through (and including) the

current year. See Pub. 946, How To Depreciate Property.

In column (b), enter the depreciation that would have

been allowable if the property had not been used more

than 50% in a qualified business. Figure the depreciation

from the year it was placed in service up to (but not

including) the current year. See Pub. 463 and Pub. 946.

Line 35

Subtract line 34 from line 33 and enter the recapture

amount as “other income” on the same form or schedule

on which you took the deduction. For example, if you took

the deduction on Schedule C (Form 1040), report the

recapture amount as other income on Schedule C (Form

1040).

Note. If you filed Schedule C or F (Form 1040) and the

property was used in both your trade or business and for

the production of income, the portion of the recapture

amount attributable to your trade or business is subject to

self-employment tax. Allocate the amount on line 35 to the

appropriate schedules.

Be sure to increase your basis in the property by the

recapture amount.

Instructions for Form 4797 (2025)

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35 hr., 23 min.

8 hr., 20 min.

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 (2025)

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