Instructions for Form 4797 |
2006 Tax Year |
Instructions for Form 4797 - Notices
This is archived information that pertains only to the 2006 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.
Section 1231 transactions.
The following are section 1231 transactions.
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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.
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Cutting of timber that the taxpayer elects to treat as a sale or exchange under section 631(a).
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Disposal of timber with a retained economic interest that is treated as a sale, or an outright sale of timber, under section
631(b).
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Disposal of coal (including lignite) or domestic iron ore with a retained economic interest that is treated as a sale under
section
631(c).
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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.
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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.
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Sales or exchanges of unharvested crops. See section 1231(b)(4).
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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.
Transactions to which section 1231 does not apply.
Section 1231 transactions do not include sales or exchanges of:
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Inventory or property held primarily for sale to customers;
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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
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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.
Worksheet for Partners and S Corporation Shareholders to Figure Gain or Loss on Dispositions of Property for Which a Section
179 Deduction Was Claimed
Caution: See the worksheet instructions below before
starting.
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1.
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Gross sales price
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1.
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2.
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Cost or other basis
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2.
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3.
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a
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Depreciation (excluding section 179 expense deduction)
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3a.
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b
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Section 179 expense deduction
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3b.
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c
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Unused carryover of section 179 expense deduction
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3c.
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d
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Subtract line 3c from line 3b
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3d.
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e
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Add lines 3a and 3d
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3e.
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4.
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Adjusted basis. Subtract line 3e from line 2
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4.
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5.
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Gain or loss. Subtract line 4 from line 1 (see Where To Report Amounts From
Worksheet, below)
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5.
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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 23, and complete the rest of Form 4684. |
Lines 1, 2, 3a, and 3b. Enter these amounts from Schedule K-1 (Form 1065 or 1120S).
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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.
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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.
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If line 5 is a gain and the property was held more than 1 year, report the disposition as
follows.
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Complete Form 4797, line 19, columns (a), (b), and (c); Form 6252, lines 1 through 4; or Form 8824, Parts I
and II.
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Report the amount from line 1 above on Form 4797, line 20; Form 6252, line 5; or Form 8824, line 12 or
16.
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Report the amount from line 2 above on Form 4797, line 21; or Form 6252, line 8.
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Report the amount from line 3e above on Form 4797, line 22; or Form 6252, line 9.
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Report the amount from line 4 above on Form 4797, line 23; Form 6252, line 10; or Form 8824, line 13 or
18.
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Complete the rest of the applicable form.
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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.
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Complete Form 4797, line 2, columns (a), (b), and (c); or Form 8824, Parts I and II.
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Report the amount from line 1 above on Form 4797, line 2, column (d); or Form 8824, line 12 or
16.
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Report the amount from line 2 above on Form 4797, line 2, column (f).
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Report the amount from line 3e above on Form 4797, line 2, column (e).
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Report the amount from line 4 above on Form 8824, line 13 or 18.
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Complete the rest of the applicable form.
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If the property was held one 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.
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Complete Form 4797, line 10, columns (a), (b), and (c); Form 6252, lines 1 through 4; or Form 8824, Parts I
and II.
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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.
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Report the amount from line 2 above on Form 4797, line 10, column (f); or Form 6252, line 8.
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Report the amount from line 3e above on Form 4797, line 10, column (e); or Form 6252, line 9.
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Report the amount from line 4 above on Form 6252, line 10; or Form 8824, line 13 or 18.
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Complete the rest of the applicable form.
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Partners and S corporation shareholders receive a Schedule K-1 (Form 1065 or Form 1120S), which includes amounts that must
be reported on the Form
4797. Following the instructions for Schedule K-1, enter any amounts from your Schedule K-1 (Form 1120S), 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 do not have nonrecaptured section 1231 losses from prior years (see instructions
for line 8), enter the
gain from line 7 as a long-term capital gain on the Schedule D for the return you are filing.
Your net section 1231 gain on line 7 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 2001 and 2002, respectively, and net section 1231 gains of $3,000
and $2,000 in 2005 and
2006, respectively. The 2006 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 2005 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. For recordkeeping purposes, the
$4,000 loss from 2001 is all
recaptured ($3,000 in 2005 and $1,000 in 2006), and you have $5,000 of section 1231 losses from 2002 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.
For recordkeeping purposes, if line 9 is zero, the amount on line 7 is the amount of net section 1231 loss recaptured in 2006.
If line 9 is more
than zero, you have recaptured all of your net section 1231 losses from prior years.
Enter the gain from line 9 as a long-term capital gain on the Schedule D for the return you are filing.
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.
Deduct the loss from a qualifying abandonment of business or investment property on line 10. See Abandonments in Pub. 544 for more
information.
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 4.
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.
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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).
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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).
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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.
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The stock was issued for money or other property (excluding stock or securities).
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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).
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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.
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 38, column
(b)(ii). Enter on this line the smaller of the loss on Form 4797, line 11, or the loss on Form 4684, line 38, 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.
Partnerships and S corporations, see Partnerships and S corporations at the beginning of the Specific Instructions. Partners
and shareholders reporting a disposition of section 179 property which was separately reported to you on Schedule K-1 (Form
1065 or 1120S), see
Partners and S corporation shareholders at the beginning of the Specific Instructions.
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. 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.
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 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.
Complete the following steps to figure the amount to enter on line 22.
Step 1.
Add the following amounts.
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Deductions allowed or allowable for depreciation (including any special depreciation allowance (see the Form 4562 Instructions)),
amortization, depletion, or preproductive expenses (see Disposition of plants and animals in chapter 9 of Pub. 225).
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The section 179 expense deduction.
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The commercial revitalization deduction.
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The downward basis adjustment under section 50(c) (or the corresponding provision of prior law).
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The deduction for qualified clean-fuel vehicle property or refueling property, for property placed in service before January
1,
2006.
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Deductions claimed under section 190, 193, or 1253(d)(2) or (3) (as in effect before the enactment of P.L. 103-66).
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The basis reduction for the qualified electric vehicle credit.
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The basis reduction for the employer-provided childcare facility credit.
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The deduction for energy efficient commercial building property placed in service after December 31, 2005.
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The basis reduction for the alternative motor vehicle credit for property placed in service after December 31, 2005.
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The basis reduction for the alternative fuel vehicle refueling property credit for property placed in service after December
31,
2005.
Step 2.
From the Step 1 total, subtract the following amounts.
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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).
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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.
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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.
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Any basis increase for qualified electric vehicle credit recapture.
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Any basis increase for recapture of the employer-provided childcare facility credit.
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Any basis increase for recapture of the alternative motor vehicle credit for property placed in service after December 31,
2005.
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Any basis increase for recapture of the alternative fuel vehicle refueling property credit for property placed in service
after December 31,
2005.
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). Also, see Like-Kind Exchanges under Nontaxable Exchanges in chapter 1 of Pub. 544.
For section 1255 property, enter the adjusted basis of the section 126 property disposed of.
New recapture rules apply to the disposition of amortizable section 197 intangibles after August 8, 2005. If you dispose of
more than one
amortizable section 197 intangible (as defined in section 197(c)) in a single transaction (or a series of related transactions),
all of these
intangibles are treated as one section 1245 property. However, if the adjusted basis of any amortizable section 197 intangible
exceeds its fair market
value, this rule does not apply to that intangible. See section 1245(b)(9) for more information.
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.
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Personal property.
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Elevators and escalators placed in service before 1987.
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Real property (other than property described under tangible real property below) subject to amortization or deductions under
section 169,
179, 179A, 179B, 179C (for property placed in service after August 8, 2005), 179D (for property placed in service after December
31, 2005), 185
(repealed), 188 (repealed), 190, 193, or 194.
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Tangible real property (except buildings and their structural components) if it is used in any of the following ways.
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As an integral part of manufacturing, production, or extraction or of furnishing transportation, communications, or certain
public utility
services.
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As a research facility in these activities.
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For the bulk storage of fungible commodities (including commodities in a liquid or gaseous state) used in these activities.
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A single purpose agricultural or horticultural structure (as defined in section 168(i)(13)).
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A storage facility (not including a building or its structural components) used in connection with the distribution of petroleum
or any
primary petroleum product.
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Any railroad grading or tunnel bore (as defined in section 168(e)(4)).
Exceptions and limits.
See section 1245(b) for exceptions and limits involving the following.
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Gifts.
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Transfers at death.
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Certain tax-free transactions.
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Certain like-kind exchanges, involuntary conversions, etc.
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Exchanges to comply with SEC orders.
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Property distributed by a partnership to a partner.
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Transfers to tax-exempt organizations where the property will be used in an unrelated business.
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Timber property.
Special rules.
See the following sections for special rules.
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Section 1245(a)(4) (repealed) for player contracts and section 1056(c) (repealed) for information required from the transferor
of a
franchise of any sports enterprise, for sales or exchanges before October 23, 2004, involving the transfer of player contracts.
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Section 1245(a)(5) (repealed) for property placed in service before 1987, if only a portion of a building is section 1245
recovery
property.
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Section 1245(a)(6) (repealed) for qualified leased property placed in service before 1987.
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Section 1245(b)(9) for dispositions of amortizable section 197 intangibles.
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 the 30% or 50% 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.
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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).
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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).
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.
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15-, 18-, or 19-year real property and low-income housing that is residential rental property.
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15-, 18-, or 19-year real property and low-income housing that is used mostly outside the United States.
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15-, 18-, or 19-year real property and low-income housing for which a straight line election was made.
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Low-income rental housing described in clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B). See the instructions for
line
26b.
Exceptions and limits.
See section 1250(d) for exceptions and limits involving the following.
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Gifts.
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Transfers at death.
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Certain tax-free transactions.
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Certain like-kind exchanges, involuntary conversions, etc.
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Exchanges to comply with SEC orders.
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Property distributed by a partnership to a partner.
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Disposition of qualified low-income housing.
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Transfers of property to tax-exempt organizations if the property will be used in an unrelated business.
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Dispositions of property as a result of foreclosure proceedings.
Special rules.
Special rules apply in the following cases.
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For additional depreciation attributable to rehabilitation expenditures, see section 1250(b)(4).
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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.
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80% if the farmland was disposed of within the 6th year after it was acquired.
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60% if disposed of within the 7th year.
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40% if disposed of within the 8th year.
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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:
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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
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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:
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Were deducted under section 263, 616, or 617 by the taxpayer or any other person; and
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But for such deduction, would have been included in the basis of the property, plus
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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 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.
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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