| Instructions for Form 4797 |
2003 Tax Year |
Instructions for Form 4797 - Notices
This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Use Part I to report section 1231 transactions that are not required to be reported in Part III. 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 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 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). 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 losses.
Section 1231 transactions do not include sales or exchanges of:
- Inventory or property held primarily for sale to customers;
- 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 received from the Government other than by purchase
at the normal
sales price or that you got from someone who had received it in a similar way, if your basis is determined by reference to
the previous owner's
basis.
Your net section 1231 gain on line 7, column (g), is treated as ordinary income to the extent of your “nonrecaptured section 1231 losses.”
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.
Example.
You had net section 1231 losses of $4,000 and $6,000 in 1998 and 1999, respectively, and net section 1231 gains of $3,000
and $2,000 in 2002 and
2003, respectively. The 2003 net section 1231 gain of $2,000 is entered on line 7, column (g), 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 2002 net section 1231 gain) are entered on
line 8, column (g). The
entire $2,000 net section 1231 gain on line 7, column (g), is treated as ordinary income and is entered on line 12 of Form
4797. For recordkeeping
purposes, the $4,000 loss from 1998 is all recaptured ($3,000 in 2002 and $1,000 in 2003), and you have $5,000 of section
1231 losses from 1999 left
to recapture ($6,000 minus the $1,000 recaptured this year).
Figuring the Prior Year Losses
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.
Make an entry on line 8, column (h), only if line 9, column (g), is more than zero. Figure the amount to enter as follows.
- If line 7, column (h), is zero or less, enter zero on line 8, column (h).
- If line 7, column (h), is more than zero, enter on line 8, column (h), the smaller of line 7, column (h), or line 8, column
(g).
For recordkeeping purposes, if line 9, column (g), is zero, the amount on line 7, column (g), is the amount of net section
1231 loss recaptured in
2003. If line 9, column (g), is more than zero, you have recaptured all of your net section 1231 losses from prior years.
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.
Report other ordinary gains and losses, including gains and losses from property held 1 year or less, on this line.
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 on page 2). 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
on page 3.
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.
To qualify as section 1244 stock, all six of the following requirements must be met.
- You acquired the stock after June 30, 1958, upon original issuance of the shares from a domestic corporation (or the stock
was acquired by a
partnership in which you were a partner continuously from the date the stock was issued until the time of the loss).
- If the stock was issued before November 7, 1978, it was issued under a written plan that met the requirements of Regulations
section
1.1244(c)-1(f), and when that plan was adopted, the corporation was treated as a small business corporation under Regulations
section
1.1244(c)-2(c).
- If the stock was issued after November 6, 1978, the corporation was treated as a small business corporation at the time the
stock was issued
under Regulations section 1.1244(c)-2(b). To be treated as a small business corporation, the total amount of money and other
property received by the
corporation for its stock as a contribution to capital and paid-in surplus generally may not exceed $1 million.
- The stock was issued for money or other property (excluding stock or securities).
- The corporation, for its 5 most recent tax years ending before the date of the loss, derived more than 50% of its gross receipts
from
sources other than royalties, rents, dividends, interest, annuities, and gains from sales and exchanges of stocks or securities. (If the
corporation was in existence for at least 1 tax year but fewer than 5 tax years ending before the date of the loss, the 50%
test applies for the tax
years ending before that date. If the corporation was not in existence for at least 1 tax year ending before the date of the
loss, the 50% test
applies for the entire period ending before that date.) The 50% test does not apply if the corporation's deductions (other
than the net operating loss
and dividends-received deductions) exceeded its gross income during the applicable period. But this exception to the 50% test
applies only if the
corporation was largely an operating company within the 5 most recent tax years ending before the date of the loss (or, if
less, the entire period the
corporation was in existence).
- If the stock was issued before July 19, 1984, it must have been common stock.
The maximum amount that may be treated as an ordinary loss 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. Report on Schedule
D losses in excess of the
maximum amount that may be treated as an ordinary loss (and all gains) from the sale or exchange of section 1244 stock.
Keep adequate records to distinguish section 1244 stock from any other stock owned in the same corporation.
If you have a recapture of section 179 expense deduction reported on Schedule K-1 (Form 1065), line 25, or Schedule K-1 (Form
1120S), line 23, from
a disposition(s) of property by a partnership or S corporation with a fiscal year beginning in 2002 and ending in 2003 (and
that partnership or S
corporation fiscal year ends with or within your tax year that begins in 2003), report the recapture amount on line 17, adjusted,
if necessary, as
explained below. Also, for purposes of the following instructions, if you did not deduct the section 179 expense in a prior
year, reduce your section
179 expense deduction carryover by the amount attributable to the amount reported on Schedule K-1, and treat the amount reported
on Schedule K-1 as
being reduced by the same amount.
If the section 179 expense deduction recapture pertains to a disposition of property by a partnership or S corporation with
a 2003 calendar year or
a fiscal year beginning in 2003, see the Part III instructions (instead of the following).
Note:
If the recapture of section 179 expense deduction pertains to property for which the business use dropped to 50% or less,
see the Part IV
instructions (instead of the following).
The section 179 expense deduction recapture amount reported on Schedule K-1 (Form 1065), line 25, or Schedule K-1 (Form 1120S),
line 23, may
pertain to more than one asset. You are required to figure an adjustment amount for each asset. To do so, you need the following
information for each
asset from the partnership or S corporation:
- Description of the property,
- Gross sales price,
- Cost or other basis plus expense of sale (not including the partnership's or S corporation's basis reduction in the property due
to the section 179 expense deduction),
- Depreciation allowed or allowable (not including the section 179 expense deduction), and
- Amount of section 179 expense deduction passed through in previous tax years for the property and the partnership's or S corporation's
tax
year(s) for which the amount was passed through.
If you do not have all of the above information, contact the partnership or S corporation.
Recomputed gain or loss.
Using the information listed above (provided by the partnership or S corporation), recompute the gain or loss the
partnership or S corporation
reported to you for each asset using the worksheet on page 5.
| Worksheet for Recomputation of Gain or Loss |
| 1. |
Gross sales price |
|
| 2. |
Cost or other basis plus expense of sale (not including the partnership's or S corporation's basis reduction in the property
due to the section 179 expense deduction)
|
|
| 3. |
Depreciation allowed or allowable (not including the section 179 expense deduction)
|
|
| 4. |
Subtract the amount on line 3 from the amount on line 2 |
|
| 5. |
Subtract the amount on line 4 from the amount on line 1 |
|
Adjustment amounts.
For each asset, if the amount on line 5 of the worksheet is a loss, treat that amount as a positive amount and compare
it to the amount of section
179 expense deduction passed through in previous tax years for the property (provided by the partnership or S corporation).
Enter the smaller of the
two amounts on line 2 of Form 4797 as a positive amount. Also, reduce the section 179 expense recapture amount reported to
you on Schedule K-1 by the
same amount before entering it on line 17.
If the amount on line 5 of the worksheet is a gain, no adjustment is needed to the section 179 expense deduction recapture
amount reported on
Schedule K-1 (Form 1065), line 25, or Schedule K-1 (Form 1120S), line 23. Enter that amount (without reduction) on line 17
of Form 4797. Also, do
not enter an adjustment amount on line 2 of Form 4797.
You must complete this line if there is a gain on Form 4797, line 3, column (g); 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 part of the loss from income-producing
property on Schedule
A (Form 1040), line 27, and the part of the loss from property used as an employee on Schedule A (Form 1040), line 22.
Generally, for property held 1 year or less, do not complete Part III; instead use Part II. For exceptions, see the chart on page 1.
Use Part III to figure recapture of depreciation and certain other items that must be reported as ordinary income on the disposition
of property.
Fill out lines 19 through 24 to determine the gain on the disposition of the property, including dispositions of property
for which the section 179
expense deduction was separately reported to you on Schedule K-1 by a partnership or S corporation (see the instructions for
line 22). If you have
more than four properties to report, use additional forms. For more details on depreciation recapture, see Pub. 544.
Note:
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.
Partnerships, S corporations, and their partners and shareholders should see the line 22 instructions before completing Part
III.
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 realized. For section
1255 property disposed
of in any other way, enter the FMV.
Reduce the cost or other basis of the property by the amount of any diesel-powered highway vehicle credit, enhanced oil recovery
credit, or
disabled access credit.
However, do not reduce the cost or other basis on this line by any of the following amounts.
- Deductions allowed or allowable for depreciation (including the 30% or 50% special depreciation allowance), amortization,
depletion, or
preproductive expenses.
- The section 179 expense deduction.
- The commercial revitalization deduction.
- 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 the qualified electric vehicle credit.
Instead, include these amounts on line 22. They will be used to determine the property's adjusted basis on line 23.
Partnerships and S corporations, see the instructions below under Partnerships or S corporations. Partners and shareholders
reporting a disposition of section 179 property separately reported to you on Schedule K-1 (Form 1065 or 1120S), see Partners and S corporation
shareholders on page 6. All others, complete the following steps to figure the amount to enter on line 22.
Step 1.
Add the following amounts.
- Deductions allowed or allowable for depreciation (including the 30% or 50% special depreciation allowance), amortization,
depletion, or
preproductive expenses.
- The section 179 expense deduction.
- The commercial revitalization deduction.
- 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 the qualified electric vehicle credit.
Step 2.
From the Step 1 total, subtract the following amounts.
- 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 because the property
ceased to be
eligible for the deduction.
- Any basis increase for qualified electric vehicle credit recapture.
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. An example is property acquired by a trade-in.
See Regulations section
1.1245-2(a)(4).
Partnerships.
Partnerships (other than electing large partnerships) that sell, exchange, or otherwise dispose of property for which
a section 179 expense
deduction was previously passed through to the partners should not complete Form 4797 with respect to dispositions that are
required to be separately
stated (see the instructions for Schedule K (Form 1065) for details).
In all other cases, the partnership should enter the deductions allowed or allowable for depreciation, amortization,
or depletion on line 22 (see
steps 1 and 2 on page 5). Partners adjust the basis of their interest in the partnership to take into account the basis adjustments
made at the
partnership level.
S corporations.
S corporations that sell, exchange, or otherwise dispose of property for which a section 179 expense deduction was
previously passed through to the
shareholders should not complete Form 4797 with respect to dispositions that are required to be separately stated (see the
instructions for Schedule K
(Form 1120S) for details).
In all other cases, the S corporation should enter the deductions allowed or allowable for depreciation, amortization,
or depletion on line 22 (see
steps 1 and 2 on page 5). S corporations must make the basis adjustment required under section 50(c) (or the corresponding
provision of prior law).
Shareholders adjust the basis in their stock in the corporation to take into account the basis adjustments made at the S corporation
level under
section 50(c) (or the corresponding provision of prior law).
Partners and S corporation shareholders.
If you are a partner or an S corporation shareholder and the partnership or S corporation has given you a Schedule
K-1 that separately reports
information on the sale, exchange, or other disposition of property for which the section 179 expense deduction was claimed,
use the following
instructions to report the disposition of the property on your Form 4797. This information will be separately reported to
you on line 25 of the
Schedule K-1 (Form 1065) or on line 23 of the Schedule K-1 (Form 1120S). Use this information to complete lines 19 through
22 of Form 4797. For line
22, use the following instruction to determine the amount to enter on that line.
Line 22.
The partnership or S corporation will separately state the following amounts:
- Depreciation allowed or allowable with respect to the property. (This does not include the section 179 expense deduction.)
- Section 179 expense deduction previously reported to you with respect to the property.
You should generally add these two amounts and enter the result on line 22 of Form 4797. However, if you were unable
to claim all of the section
179 expense deduction previously reported to you with respect to the property, you should do the following.
- Subtract your carryover of disallowed section 179 expense deduction with respect to that property (from Form 4562) from the
section 179
expense deduction previously reported to you with respect to that property.
- Add the result to the depreciation allowed or allowable with respect to that property and enter the result on line 22 of Form
4797.
Complete the remainder of Part III as indicated on Form 4797 and instructions. You must also make a corresponding adjustment
to your section 179
expense deduction carryover on Form 4562.
Note:
In some cases, the above adjustment may change a gain into a loss. If this is the case, report the loss in Part I instead
of Part III.
For section 1255 property, enter the adjusted basis of the section 126 property disposed of.
Section 1245 property is property that is depreciable (or amortizable under section 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 below) subject to amortization or deductions under
section 169,
179, 179A, 185 (repealed), 188 (repealed), 190, 193, or 194.
- Tangible real property (except buildings and their structural components) if it is used in any of the following ways.
- As an integral part of manufacturing, production, or extraction or of furnishing transportation, communications, or certain
public utility
services.
- As a research facility in these activities.
- 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)).
See section 1245(b) for exceptions and limits involving the following.
- Gifts.
- Transfers at death.
- Certain tax-free transactions.
- Certain like-kind exchanges, involuntary conversions, etc.
- Exchanges to comply with SEC orders.
- 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.
See the following sections for special rules.
- Section 1245(a)(4) for player contracts and section 1056(c) for information required from the transferor of a franchise of
any sports
enterprise if the sale or exchange involves the transfer of player contracts.
- Section 1245(a)(5) (repealed) for property placed in service before 1987, if only a portion of a building is section 1245
recovery
property.
- Section 1245(a)(6) (repealed) for qualified leased property placed in service before 1987.
Section 1250 property is depreciable real property (other than section 1245 property). Section 1250 recapture applies if you
used an accelerated
depreciation method or you claimed the 30% or 50% special depreciation allowance, or the commercial revitalization deduction.
Section 1250 recapture
does not apply to dispositions of the following property placed in service after 1986 (or after July 31, 1986, if elected).
- 27.5-year (or 40-year, if elected) 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) 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).
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.
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.
- Exchanges to comply with SEC orders.
- 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 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).
Enter the additional depreciation for the period after 1975. Additional depreciation is the excess of actual depreciation (including any
30% or 50% 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.
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.
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.
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.
Partnerships (other than electing large 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.
You may have ordinary income on the disposition of certain farmland held more than 1 year but less than 10 years.
Refer to section 1252 to determine if there is ordinary income on the disposition of certain farmland for which deductions
were allowed under
sections 175 (soil and water conservation) and 182 (land clearing) (repealed). Skip line 27 if you dispose of such farmland
during the 10th or later
year after you acquired it.
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.
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 line 22 of Form 4797 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).
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.
If you disposed of a portion of section 1254 property or an undivided interest in it, see section 1254(a)(2).
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.
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.
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.
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, Entertainment, 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.
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).
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.
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.
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 average time
is:
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.
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