Form 4797: Business Property Sales
Form 4797 reports the sale of business and investment property, including rental real estate. It handles depreciation recapture, Section 1231 gains, and involuntary conversions that cannot be reported on Schedule D.
When Required
- Sale of rental real estate
- Sale of commercial property
- Involuntary conversions (condemnation, casualty)
- Sale of depreciable business property
- Section 1231 gain/loss reporting
Depreciation Recapture
- Recaptures tax benefit of prior depreciation deductions
- Taxed at maximum 25% (unrecaptured Section 1250 gain)
- Remaining gain taxed at long-term capital gains rates
- Deferrable through Section 1031 like-kind exchange
1031 Exchange Deferral
Both capital gain and depreciation recapture are deferred in a 1031 exchange. Deferred recapture carries to the replacement property and is eliminated entirely if held until death (stepped-up basis).
Related Terms
- Closing — Exchange deadlines start at closing
- Equity — Tax-deferred equity growth
- Contract — Exchange agreements
Barnes Walker Tax Planning
Barnes Walker's attorneys advise Florida real estate investors on depreciation recapture, 1031 exchanges, and property sale tax planning. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC