# Form 4797: Sales of Business Property Definition: What It Is and How to File

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> **Definition**
>
> Form 4797 is used for reporting gains made from selling or exchanging business property.

## What Is Form 4797: Sales of Business Property?

Form 4797: Sales of Business Property is a tax form distributed by the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp). It is used to report [gains](https://www.investopedia.com/terms/g/gain.asp) made from the sale or exchange of business property, including (but not limited to) property used to generate rental income, and property used for industrial, agricultural, or extractive resources.  

### Key Takeaways

*   Form 4797 is an IRS tax form.
*   Entities use the form report gains from the sale or exchange of business property, including property used to generate rental income and property used for industrial, agricultural, or extractive resources.
*   When filling out Form 4797, entities must provide the following information: a description of the property, purchase date, sale or transfer date, cost of purchase, gross sales price, and the depreciation amount.

## Who Can File Form 4797?

Business property that is reported on Form 4797 may include property that is purchased in order to produce rental income. Taxpayers may also report a home that was used as a business on Form 4797. Gains made from the sale of oil, gas, geothermal, or mineral properties are also reported on Form 4797.

> **Important**
>
> If a piece of property was used partially for business purposes, or to produce income—while also serving as a primary residence—gains from the sale of that property may be eligible for tax exclusion. This is typically the case for self-employed people and independent contractors who work from home.

The net profit or loss from the transfer or sale of the business property is determined by subtracting the [cost basis](https://www.investopedia.com/terms/c/costbasis.asp), or purchase price, from the sum of the sales price minus any [depreciation](https://www.investopedia.com/terms/d/depreciation.asp) costs.

## How to File Form 4797

Form 4797 has four parts. In general, most depreciable property held for more than a year is recognized under Part I: Sales or Exchanges of Property Used in a Trade or Business and Involuntary Conversions from Other Than Casualty or Theft.

Property held for a year or less and sold for a loss is recorded in Part II: Ordinary Gains and Losses. Capital assets held for more than a year and sold for a profit fall in the section labeled Part III: Gain From Disposition of Property Under [Sections 1245](https://www.investopedia.com/terms/s/section1245.asp), [1250](https://www.investopedia.com/terms/s/section1250.asp), 1252, 1254, and 1255.

For a corporation or partnership, the total amount entered on Line 17, Part II, must be added to the gross income line on Schedule C. Part IV is labeled Recapture Amounts Under [Sections 179](https://www.investopedia.com/terms/s/section-179.asp) and 280F(b)(2): When Business Use Drops to 50% or Less.

When a business, such as a [flow-through entity](https://www.investopedia.com/terms/f/flow-through.asp)—like a partnership or an [S Corporation](https://www.investopedia.com/terms/s/subchapters.asp)—sells a property, partners, and shareholders may experience a tax event (either a gain or a loss) when the property is sold and a Form 4797 is filed.

The disposition of capital assets not reported on [Schedule D](https://www.investopedia.com/terms/s/scheduled.asp) must be reported on Form 4797.

![Form 4797](https://www.investopedia.com/thmb/EtXkd-_NdHhLY90vNWgh5mYDckY=/1017x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2025-03-13at2.06.10PM-3908376e7b2d4079bb31f9b710c6ae40.png)

**

All pages of Form 4797 are available on the [IRS website](https://www.irs.gov/pub/irs-pdf/f4797.pdf).

## What Is the Difference Between Schedule D and Form 4797?

Schedule D is used to [report gains from personal investments](https://www.investopedia.com/ask/answers/081514/when-would-i-have-fill-out-schedule-d-irs-form.asp), while Form 4797 is used to report gains from [real estate](https://www.investopedia.com/terms/r/realestate.asp) dealings—specifically, those that are done primarily in relation to business rather than personal transactions.

## Should You Use Form 8949 or Form 4797?

When reporting gains from the [sale of real estate](https://www.investopedia.com/ask/answers/12/capital-gains-taxes-home-sales.asp), Form 4797 will suffice in most scenarios. [Form 8949](https://www.investopedia.com/articles/personal-finance/083015/purpose-irs-form-8949.asp) will need to be used when deferring [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp) through investments in a qualified fund.

## How Do I Avoid Capital Gains Tax on a Business Sale?

You cannot avoid paying capital gains tax, but you can defer it. To defer paying capital gains tax on a business sale, you may reinvest the capital gains into a [qualified opportunity fund](https://www.investopedia.com/opportunity-fund-4688682).

## The Bottom Line

Form 4797 (Sales of Business Property), issued by the IRS, is used to report financial gains made from the sale or exchange of business property. The form requires a variety of information to be provided, such as the description of the property, the purchase date, depreciation, and the cost of the purchase.

> **Article Sources**
>
> 1.  Internal Revenue Service. "[Instructions for Form 4797, Sales of Business Property](https://www.irs.gov/pub/irs-pdf/i4797.pdf)," Page 1.
>     
> 2.  Internal Revenue Service. "[Form 4797, Sales of Business Property](https://www.irs.gov/pub/irs-pdf/f4797.pdf)," Page 1.
>     
> 3.  Internal Revenue Service. "[Form 4797, Sales of Business Property](https://www.irs.gov/pub/irs-pdf/f4797.pdf)."
>     
> 4.  Internal Revenue Service. "[Instructions for Schedule C, Profit or Loss From Business](https://www.irs.gov/pub/irs-pdf/i1040sc.pdf)," Pages 2, 12.
>     
> 5.  Internal Revenue Service. "[Form 4797, Sales of Business Property](https://www.irs.gov/pub/irs-pdf/f4797.pdf)," Page 2.
>     
> 6.  Internal Revenue Service. "[Instructions for Form 4797, Sales of Business Property](https://www.irs.gov/pub/irs-pdf/i4797.pdf)," Page 5.
>     
> 7.  Internal Revenue Service. "[About Form 4797, Sales of Business Property](https://www.irs.gov/forms-pubs/about-form-4797)."
>     
> 8.  Internal Revenue Service. "[About Schedule D (Form 1040), Capital Gains and Losses](https://www.irs.gov/forms-pubs/about-schedule-d-form-1040)."
>     
> 9.  Internal Revenue Service. "[Instructions for Form 8949, Sales and Other Dispositions of Capital Assets](https://www.irs.gov/pub/irs-pdf/i8949.pdf)," Page 1.
>     
> 10.  Internal Revenue Service. "[Instructions for Form 8949, Sales and Other Dispositions of Capital Assets](https://www.irs.gov/pub/irs-pdf/i8949.pdf)," Pages 1, 11-12.