Form 4797 is filed with an income tax return to report the sale of assets used in a trade or business. This example Form 4797 covers a scenario where the business sells company vehicles and has to account for depreciation recapture.
IRS Form 4797 is used to report the sale of assets used in a trade or business. Many businesses use bonus depreciation or Section 179 to accelerate depreciation expense. If business use falls below 50%, there may be depreciation recapture.
The sale of real estate is generally treated as Section 1250 property. An investor may have to recognize ordinary income recapture when they dispose of a rental real estate investment.
Section 1250 property is generally depreciable real property. The Section 1250 rules for gains, losses, and depreciation recapture are different from personal property. Unrecaptured Section 1250 is depreciation recapture subject to maximum 25% tax rate.
Section 1231 applies to property used in a trade or business that was held for more than 1 year. Section 1231 gains are taxed as long-term gains while losses are ordinary. This article discusses Section 1231 as it applies to rental real estate.
The sale of property used in a trade or business is generally reported on Form 4797. This article and video tutorial cover Form 4797 reporting for the sale of rental real estate.
When the business use of an asset falls below 50%, the business may have to recapture accelerated depreciation taken in earlier tax years. This example covers bonus depreciation recapture for business use vehicles.
