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96 Department of the Treasury

Internal Revenue Service

Instructions for Form 4797
Sales of Business Property
(Also Involuntary Conversions and Recapture Amounts
Under Sections 179 and 280F(b)(2))
Section references are to the Inter nal Revenue Code unless otherwise noted.

Paperwork Reduction Act If you have comments concerning the ● The computation of recapture amounts under
accuracy of these time estimates or suggestions sections 179 and 280F(b)(2), when the business
Notice for making this form simpler, we would be happy use of section 179 or listed property drops to
We ask for the information on this form to carry to hear from you. See the instructions for the tax 50% or less.
out the Internal Revenue laws of the United return with which this form is filed.
States. You are required to give us the Other Forms To Use
information. We need it to ensure that you are General Instructions ● Use Form 4684, Casualties and Thefts, to
complying with these laws and to allow us to report involuntary conversions from casualties
figure and collect the right amount of tax. Purpose of Form and thefts.
You are not required to provide the Use Form 4797 to report: ● Use Form 8824, Like-Kind Exchanges, for
information requested on a form that is subject ● The sale or exchange of property used in your each exchange of qualifying business or
to the Paperwork Reduction Act unless the form trade or business; depreciable and amortizable investment property for property of a like kind.
displays a valid OMB control number. Books or property; oil, gas, geothermal, or other mineral For exchanges of property used in a trade or
records relating to a form or its instructions must properties; and section 126 property. business (and other noncapital assets), enter the
be retained as long as their contents may gain or (loss) from Form 8824, if any, on line 5
become material in the administration of any ● The involuntary conversion (from other than
or 17.
Internal Revenue law. Generally, tax returns and casualty or theft) of property used in your trade
or business and capital assets held in ● If you sold property on which you claimed
return information are confidential, as required
connection with a trade or business or a investment credit, get Form 4255, Recapture of
by section 6103.
transaction entered into for profit. Investment Credit, to see if you must recapture
The time needed to complete and file this form some or all of the credit.
will vary depending on individual circumstances. ● The disposition of noncapital assets other than
The estimated average time is: inventory or property held primarily for sale to Special Rules
customers in the ordinary course of your trade or
Recordkeeping 30 hr., 8 min. business. Allocation of purchase price.—If you acquire or
● The recapture of section 179 expense dispose of assets that constitute a trade or
Learning about the law
deductions for partners and S corporation business, the buyer and seller must allocate the
or the form 13 hr., 10 min.
shareholders from property dispositions by total purchase price using the residual method
Preparing the form 18 hr., 53 min. partnerships and S corporations. and must file Form 8594, Asset Acquisition
Copying, assembling, and
sending the form to the IRS 1 hr., 20 min. At-risk rules.—If you report a loss on an asset
used in an activity for which you are not at risk,
in whole or in part, see the instructions for Form
Where To Make First Entry for Certain Items Reported on This Form 6198, At-Risk Limitations. Also, get Pub. 925,
(b) (c) Passive Activity and At-Risk Rules. Losses from
(a) passive activities are first subject to the at-risk
Held 1 year Held more
Type of property rules and then to the passive activity rules.
or less than 1 year
Installment sales.—If you sold property at a
1 Depreciable trade or business property: gain and you will receive a payment in a tax year
a Sold or exchanged at a gain Part II Part III (1245, 1250) after the year of sale, you generally must report
b Sold or exchanged at a loss Part II Part I the sale on the installment method unless you
elect not to do so.
2 Depreciable residential rental property:
Use Form 6252, Installment Sale Income, to
a Sold or exchanged at a gain Part II Part III (1250)
report the sale on the installment method. Also
b Sold or exchanged at a loss Part II Part I use Form 6252 to report any payment received
3 Farmland held less than 10 years upon which soil, water, in 1996 from a sale made in an earlier year that
or land clearing expenses were deducted: you reported on the installment method.
a Sold at a gain Part II Part III (1252) To elect out of the installment method, report
b Sold at a loss Part II Part I the full amount of the gain on a timely filed
return (including extensions).
4 Disposition of cost-sharing payment property described
in section 126 Part II Part III (1255) Get Pub. 537, Installment Sales, for more
5 Cattle and horses used in a trade or business for draft, Held less than Held 24 months Involuntary conversion of property.—You may
breeding, dairy, or sporting purposes: 24 months or more not have to pay tax on a gain from an
a Sold at a gain Part II Part III (1245) involuntary or compulsory conversion of
property. Get Pub. 544, Sales and Other
b Sold at a loss Part II Part I Dispositions of Assets, for details.
c Raised cattle and horses sold at a gain Part II Part I One-time exclusion on the sale of a home
used for business.—If you rented or used part
6 Livestock other than cattle and horses used in a trade or Held less than Held 12 months of your home for business and meet the
business for draft, breeding, dairy, or sporting purposes: 12 months or more requirements to take the one-time exclusion for
a Sold at a gain Part II Part III (1245) persons age 55 or older, you may be able to
exclude part or all of the gain figured on line 26.
b Sold at a loss Part II Part I For details on electing the one-time exclusion
c Raised livestock sold at a gain Part II Part I and allocating the sales price, expenses of sale,

Cat. No. 13087T
and the adjusted basis of the home, see the ● Sales or exchanges of cattle and horses, to the extent taken into account in figuring
instructions for Form 2119, Sale of Your Home. regardless of age, used in a trade or business by taxable income except that the limitation on
To report the sale and the one-time exclusion the taxpayer for draft, breeding, dairy, or capital losses does not apply.
on Form 4797, figure the gain on the part that sporting purposes and held for 24 months or Line 10.—For recordkeeping purposes, if line 10
was rented or used for business in Part III. Do more from acquisition date. is zero, the amount on line 8 is the amount of
not take the exclusion into account when ● Sales or exchanges of livestock other than net section 1231 loss recaptured in 1996. If line
figuring the gain on line 26, but do take it into cattle and horses, regardless of age, used by the 10 is more than zero, you have recaptured in
account when figuring section 1250 recapture, if taxpayer for draft, breeding, dairy, or sporting 1996 all your net section 1231 losses from prior
any, on line 28g. On line 2 of Part I, write purposes and held for 12 months or more from years.
“Section 121 exclusion” and enter the amount of acquisition date.
the exclusion in column (g). Complete Part II of Note: Livestock does not include poultry,
Part II
Form 2119 and attach it and Form 4797 to your chickens, turkeys, pigeons, geese, other birds, If a transaction is not reportable in Part I or Part
return. fish, frogs, reptiles, etc. III and the property is not a capital asset
Passive loss limitations.—If you have an overall ● Sales or exchanges of unharvested crops. See reportable on Schedule D, report the transaction
loss from passive activities, and you report a section 1231(b)(4). in Part II.
loss on an asset used in a passive activity, use If you receive ordinary income from a sale or
Form 8582, Passive Activity Loss Limitations, to ● Involuntary conversions of trade or business
property or capital assets held more than 1 year other disposition of your interest in a partnership,
see how much loss is allowed before entering it get Pub. 541, Partnerships.
on Form 4797. in connection with a trade or business or a
transaction entered into for profit. Line 11.—Report other ordinary gains and
You cannot claim unused passive activity losses, including property held 1 year or less, on
credits when you dispose of your interest in an These conversions may result from (a) part or
total destruction, (b) theft or seizure, or this line.
activity. However, if you dispose of your entire
interest in an activity, you may elect to increase (c) requisition or condemnation (whether Section 1244 (small business) stock.—
the basis of the credit property by the original threatened or carried out). If any recognized Individuals report ordinary losses from the sale
basis reduction of the property to the extent that losses were from involuntary conversions from or exchange (including worthlessness) of section
the credit has not been allowed because of the fire, storm, shipwreck, or other casualty, or from 1244 (small business) stock on line 11.
passive activity rules. Make the election on Form theft, and they exceed the recognized gains from To qualify as section 1244 stock, all of the
8582-CR, Passive Activity Credit Limitations, or the conversions, do not include them when following requirements must be met:
Form 8810, Corporate Passive Activity Loss and figuring your net section 1231 losses.
1. You acquired the stock after June 30, 1958,
Credit Limitations. No basis adjustment may be Section 1231 transactions do not include upon original issuance from a domestic
elected on a partial disposition of your interest in sales or exchanges of: corporation (or the stock was acquired by a
an activity. ● Inventory or property held primarily for sale to partnership in which you were a partner
Recapture of preproductive expenses.—If you customers. continuously from the date the stock was issued
elected out of the uniform capitalization rules of ● Copyrights, literary, musical, or artistic until the time of the loss).
section 263A, any plant that you produce is compositions, letters or memoranda, or similar 2. If the stock was issued before November 7,
treated as section 1245 property. For property (a) created by your personal efforts, 1978, it was issued under a written plan that met
dispositions of plants reportable on Form 4797, (b) prepared or produced for you (in the case of the requirements of Regulations section
enter the recapture amount taxed as ordinary letters, memoranda, or similar property), or 1.1244(c)-1(f), and when that plan was adopted,
income on line 24 of Form 4797. Get Pub. 225, (c) received from someone who created them or the corporation was treated as a small business
Farmer’s Tax Guide, for more details. for whom they were created, as mentioned in corporation under Regulations section
Section 197(f)(9)(B)(ii) election.—If you elected (a) or (b), in a way that entitled you to the basis 1.1244(c)-2(c).
under section 197(f)(9)(B)(ii) to recognize gain on of the previous owner (such as by gift). 3. If the stock was issued after November 6,
the disposition of a section 197 intangible and to ● U.S. Government publications, including the 1978, the corporation was treated as a small
pay a tax on that gain at the highest tax rate, Congressional Record, that you received from business corporation, at the time the stock was
include the additional tax on Form 1040, line 38 the Government, other than by purchase at the issued, under Regulations section 1.1244(c)-2(b).
(or the appropriate line of other income tax normal sales price, or that you got from To be treated as a small business corporation,
returns). On the dotted line next to that line, someone who had received it in a similar way, if the total amount of money and other property
write “197.” The additional tax is the amount your basis is determined by reference to the received by the corporation for its stock as a
that, when added to any other income tax on the previous owner’s basis. contribution to capital and paid-in surplus
gain, equals the gain multiplied by the highest
Line 9—Nonrecaptured net section 1231 generally may not exceed $1 million.
tax rate.
losses.—Part or all of your section 1231 gains 4. The stock was issued for money or other
Transfer of appreciated property to political on line 8 may be taxed as ordinary income property (excluding stock or securities).
organizations.—Treat a transfer of property to a instead of receiving long-term capital gain
political organization as a sale of property on the 5. The corporation, for its 5 most recent tax
treatment. These net section 1231 gains are years ending before the loss, derived more than
date of transfer if the property’s fair market value treated as ordinary income to the extent of the
when transferred is more than your adjusted 50% of its gross receipts from sources other
“nonrecaptured section 1231 losses.” The than royalties, rents, dividends, interest,
basis. Apply the ordinary income or capital gains nonrecaptured losses are net section 1231
provisions as if a sale had actually occurred. See annuities, and gains from sales and exchanges
losses deducted during the 5 preceding tax of stocks or securities. (If the corporation was in
section 84. years that have not yet been applied against any existence for at least 1 tax year but fewer than 5
net section 1231 gain for determining how much
Specific Instructions gain is ordinary income under these rules.
tax years ending before the loss, the 50% test
applies for the tax years ending before the loss.
To show losses, enclose figures in (parentheses). Example. If you had net section 1231 losses If the corporation was not in existence for at
of $4,000 and $6,000 in 1991 and 1992 and net least 1 tax year ending before the loss, the 50%
Part I section 1231 gains of $3,000 and $2,000 in 1995 test applies for the entire period ending before
Section 1231 transactions are: and 1996, line 8 would show the 1996 gain of the loss.) However, the 50% test does not apply
$2,000, and line 9 would show nonrecaptured if the corporation’s deductions (other than the
● Sales or exchanges of real or depreciable net section 1231 losses of $7,000 ($10,000 net net operating loss and dividends-received
property used in a trade or business and held for section 1231 losses minus the $3,000 that was deductions) exceeded its gross income during
more than 1 year. To figure the holding period, recaptured because of the 1995 gain). The that period.
begin counting on the day after you received the $2,000 gain on line 8 is all ordinary income and
property and include the day you disposed of it. 6. If the stock was issued before July 19,
would be entered on line 13 of Form 4797. For 1984, it must have been common stock.
● Cutting of timber that the taxpayer elects to recordkeeping purposes, the $4,000 loss from
treat as a sale or exchange under section 631(a). 1991 is all recaptured ($3,000 in 1995 and The maximum amount that may be treated as
$1,000 in 1996) and you have $5,000 left to an ordinary loss is $50,000 ($100,000 if married
● Disposal of timber with a retained economic filing jointly). Special rules may limit the amount
interest that is treated as a sale under section recapture from 1992 ($6,000 minus the $1,000
recaptured this year). of your ordinary loss if (a) you received section
631(b). 1244 stock in exchange for property with a basis
● Disposal of coal (including lignite) or domestic Figuring the prior year losses.—You had a net in excess of its fair market value or (b) your
iron ore with a retained economic interest that is section 1231 loss if section 1231 losses stock basis increased from contributions to
treated as a sale under section 631(c). exceeded section 1231 gains. Gains are capital or otherwise. See Pub. 550, Investment
included only to the extent taken into account in Income and Expenses, for more details. Report
figuring gross income. Losses are included only
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on Schedule D losses in excess of the maximum 5. Deductions claimed under section 190, 193, section 185 (repealed), 197, or 1253(d)(2) or (3)
amount that may be treated as an ordinary loss or 1253(d)(2) or (3) (as in effect before the (as in effect before the enactment of P.L.
(and gains from the sale or exchange of section enactment of P.L. 103-66). 103-66)) and is one of the following:
1244 stock). Instead, include these amounts on line 24. ● Personal property.
Keep adequate records to distinguish section They will be used to determine the property’s ● Elevators and escalators placed in service
1244 stock from any other stock owned in the adjusted basis on line 25. before 1987.
same corporation. Increase the cost or other basis by any ● Real property (other than property described
Line 18.—Enter any recapture of section 179 qualified electric vehicle credit recapture amount. under tangible real property below) subject to
expense deduction included on Schedule K-1 Line 24.—For a taxpayer other than a amortization or deductions under section 169,
(Form 1065), line 25, and on Schedule K-1 (Form partnership or an S corporation, complete the 179, 185 (repealed), 188 (repealed), 190, 193, or
1120S), line 23, but only if it is due to a following steps to figure the amount to enter on 194.
disposition. Include it only to the extent that you line 24:
took a deduction for it in an earlier year. See ● Tangible real property (except buildings and
instructions for Part IV if you have section 179 Step 1.—Add the following amounts: their structural components) if it is used in any of
recapture when the business use percentage of 1. Deductions allowed or allowable for the following ways:
the property dropped to 50% or less. depreciation, amortization, depletion, or 1. As an integral part of manufacturing,
Line 20b(1).—You must complete this line if preproductive expenses; production, extraction, or furnishing
there is a gain on Form 4797, line 3; a loss on 2. The section 179 expense deduction; transportation, communications, or certain public
Form 4797, line 12; and a loss on Form 4684, utility services.
3. The downward basis adjustment under
line 35, column (b)(ii). Enter on this line and on section 50(c) (or the corresponding provision of 2. As a research facility in these activities.
Schedule A (Form 1040), line 22, the smaller of prior law); 3. For the bulk storage of fungible
the loss on Form 4797, line 12; or the loss on commodities (including commodities in a liquid
Form 4684, line 35, column (b)(ii). To figure 4. The deduction for qualified clean-fuel
vehicle property or refueling property; and or gaseous state) used in these activities.
which loss is smaller, treat both losses as
positive numbers. 5. Deductions claimed under section 190, 193, ● A single purpose agricultural or horticultural
or 1253(d)(2) or (3) (as in effect before the structure (as defined in section 168(i)(13)).
Part III enactment of P.L. 103-66). ● A storage facility (not including a building or
Generally, do not complete Part III for property Step 2.—From the step 1 total, subtract the its structural components) used in connection
held 1 year or less; use Part II instead. For following amounts: with the distribution of petroleum or any primary
exceptions, see the chart on page 1. petroleum product.
1. Any investment credit recapture amount if
Part III is used to figure recapture of the basis of the property was reduced for the tax ● Any railroad grading or tunnel bore (as defined
depreciation and certain other items that must year the property was placed in service under in section 168(e)(4)).
be reported as ordinary income on the section 50(c)(1) (or the corresponding provision See section 1245(b) for exceptions and limits
disposition of property. Fill out lines 21 through of prior law). See section 50(c)(2) (or the involving:
26 to determine the gain on the disposition of corresponding provision of prior law). ● Gifts.
the property. If you have more than four 2. Any section 179 or 280F(b)(2) recapture
properties to report, use additional forms. For ● Transfers at death.
amount included in gross income in a prior tax
more details on depreciation recapture, see Pub. year because the business use of the property ● Certain tax-free transactions.
544. dropped to 50% or less. ● Certain like-kind exchanges, involuntary
Note: If the property was sold on the installment 3. Any qualified clean-fuel vehicle property or conversions, etc.
sale basis, see the Instructions for Form 6252 refueling property deduction you were required ● Exchanges to comply with SEC orders.
before completing this part. Also, if you have to recapture because the property ceased to be
both installment sales and noninstallment sales, ● Property distributed by a partnership to a
eligible for the deduction. partner.
you may want to use a separate Form 4797, Part
III, for each installment sale and one Form 4797, You may have to include depreciation allowed ● Transfers to tax-exempt organizations where
Part III, for the noninstallment sales. or allowable on another asset (and refigure the the property will be used in an unrelated
basis amount for line 23) if you use its adjusted business.
Line 22.—The gross sales price includes money, basis in determining the adjusted basis of the
the fair market value of other property received, property described on line 21. An example is ● Timber property.
and any existing mortgage or other debt the property acquired by a trade-in. See Regulations See the following sections for special rules:
buyer assumes or takes the property subject to. section 1.1245-2(a)(4).
For casualty or theft gains, include insurance or ● Section 1245(a)(4) for player contracts and
other reimbursement you received or expect to Partnerships should enter the deductions section 1056(c) for information required from the
receive for each item. Include on this line your allowed or allowable for depreciation, transferor of a franchise of any sports enterprise
insurance coverage, whether or not you are amortization, or depletion on line 24. Enter the if the sale or exchange involves the transfer of
submitting a claim for reimbursement. section 179 expense deduction on Form 1065, player contracts.
Schedule K, line 24. Partnerships should make
For section 1255 property disposed of in a ● Section 1245(a)(5) (repealed) for property
the basis adjustment required under section
sale, exchange, or involuntary conversion, enter placed in service before 1987, when only a
50(c) (or the corresponding provision of prior
the amount realized. For section 1255 property portion of a building is section 1245 recovery
law). Partners adjust the basis of their interest in
disposed of in any other way, enter the fair property.
the partnership to take into account the basis
market value. adjustments made at the partnership level. ● Section 1245(a)(6) (repealed) for qualified
Line 23.—Reduce the cost or other basis of the leased property placed in service before 1987.
S corporations should enter the deductions
property by the amount of any qualified electric allowed or allowable for depreciation, Line 28—Section 1250 property.—Section 1250
vehicle credit, diesel-powered highway vehicle amortization, or depletion on line 24. Enter the property is depreciable real property (other than
credit, enhanced oil recovery credit, or disabled section 179 expense deduction on Form 1120S, section 1245 property). Section 1250 recapture
access credit. Schedule K, line 21, but only if the corporation applies when an accelerated depreciation
However, do not reduce the cost or other disposed of property acquired in a tax year method was used.
basis on this line by any of the following beginning after 1982. S corporations should Section 1250 recapture does not apply to
amounts: make the basis adjustment required under dispositions of the following property placed in
1. Deductions allowed or allowable for section 50(c) (or the corresponding provision of service after 1986 (or after July 31, 1986, if
depreciation, amortization, depletion, or prior law). Shareholders adjust the basis in their elected).
preproductive expenses; stock in the corporation to take into account the
1. 27.5-year (or 40-year, if elected) residential
basis adjustments made at the S corporation
2. The section 179 expense deduction; rental property.
level under section 50(c) (or the corresponding
3. The downward basis adjustment under provision of prior law). 2. 22-, 31.5-, or 39-year (or 40-year, if elected)
section 50(c) (or the corresponding provision of nonresidential real property.
Line 25.—For section 1255 property, enter the
prior law); adjusted basis of the section 126 property Real property depreciable under ACRS
4. The deduction for qualified clean-fuel disposed of. (pre-1987 rules) is subject to recapture under
vehicle property or refueling property; or section 1245, except for the following, which are
Line 27—Section 1245 property.—Section 1245
treated as section 1250 property:
property is depreciable (or amortizable under

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● 15-, 18-, or 19-year real property and You may have ordinary income on the Line 31.—Section 1255 property.—
low-income housing that is residential rental disposition of certain farmland held more than 1
Line 31a.—Use 100% if the property is
property. year but less than 10 years.
disposed of less than 10 years after receipt of
● 15-, 18-, or 19-year real property and Refer to section 1252 to determine if there is payments excluded from income. Use 100%
low-income housing that is used mostly outside ordinary income on the disposition of certain minus 10% for each year, or part of a year, that
the United States. farmland for which deductions were allowed the property was held over 10 years after receipt
● 15-, 18-, or 19-year real property and under sections 175 (soil and water conservation) of the excluded payments. Use zero if 20 years
low-income housing for which a straight line and 182 (land clearing) (repealed). Skip line 29 if or more.
election was made. you dispose of such farmland during the 10th or
Line 31b.—If any part of the gain shown on
later year after you acquired it.
● Low-income rental housing described in line 26 is treated as ordinary income under
clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B). Gain from disposition of certain farmland is sections 1231 through 1254 (e.g., section 1252),
See instructions for line 28b. subject to ordinary income rules under section enter the smaller of (a) line 26 reduced by the
1252 before being considered under section part of the gain treated as ordinary income under
See section 1250(d) for exceptions and limits 1231 (Part I). the other provision or (b) line 31a.
When filling out line 29b, enter 100% of line
● Gifts. 29a on line 29b, except as follows: Part IV
● Transfers at death. ● 80% if the farmland was disposed of within Section 179 property—column (a).—If you took
● Certain tax-free transactions. the 6th year after it was acquired. a section 179 expense deduction for property
placed in service after 1986 (other than listed
● Certain like-kind exchanges, involuntary ● 60% if disposed of within the 7th year.
property, as defined in section 280F(d)(4)), and
conversions, etc. ● 40% if disposed of within the 8th year. the business use of the property was reduced to
● Exchanges to comply with SEC orders. ● 20% if disposed of within the 9th year. 50% or less this year, complete column (a) of
● Property distributed by a partnership to a lines 35 through 37 to figure the recapture
Line 30—Section 1254 property.—If you had a amount.
partner. gain on the disposition of oil, gas, or geothermal
● Disposition of a main home. property placed in service before 1987, you must Listed property—column (b).—If you have
treat all or part of the gain as ordinary income. listed property that you placed in service in a
● Disposition of qualified low-income housing. prior year and the business use dropped to 50%
Include on line 24 of Form 4797 any depletion
● Transfers of property to tax-exempt allowed (or allowable) in determining the or less this year, figure the amount to be
organizations where the property will be used in adjusted basis of the property. recaptured under section 280F(b)(2). Complete
an unrelated business. column (b), lines 35 through 37. Get Pub. 463,
If you had a gain on the disposition of oil, gas, Travel, Entertainment, Gift, and Car Expenses,
● Dispositions of property as a result of geothermal, or other mineral properties (section
foreclosure proceedings. for more details on recapture of excess
1254 property) placed in service after 1986, you depreciation.
Special rules: must recapture all expenses that were deducted
as intangible drilling costs, depletion, mine Note: If you have more than one property
● For additional depreciation attributable to subject to the recapture rules, use separate
exploration costs, and development costs, under
rehabilitation expenditures, see section statements to figure the recapture amounts and
sections 263, 616, and 617.
1250(b)(4). attach the statements to your tax return.
Exception. Property placed in service after 1986
● If substantial improvements have been made, Line 35.—In column (a), enter the section 179
and acquired under a written contract entered
see section 1250(f). expense deduction claimed when the property
into before September 26, 1985, and binding at
Line 28a.—Enter the additional depreciation all times thereafter is treated as placed in service was placed in service. In column (b), enter the
for the period after 1975. Additional before 1987. depreciation allowable on the property in prior
depreciation is the excess of actual tax years. Include any section 179 expense
Note: In the case of a corporation that is an deduction you took as depreciation.
depreciation over depreciation figured using the
integrated oil company, amounts amortized
straight line method. For this purpose, do not Line 36.—In column (a), enter the depreciation
under section 291(b)(2) are treated as a
reduce the basis under section 50(c)(1) (or the that would have been allowable on the section
deduction under section 263(c) when completing
corresponding provision of prior law) in figuring 179 amount from the year it was placed in
line 30a.
straight line depreciation. service through the current year. Get Pub. 946,
Line 30a.—If the property was placed in How To Depreciate Property. In column (b), enter
Line 28b.—Use 100% as the percentage for
service before 1987, enter the total expenses the depreciation that would have been allowable
this line, except for low-income rental housing
after 1975 that: if the property had not been used more than
described in clause (i), (ii), (iii), or (iv) of section
1250(a)(1)(B). For this type of low-income rental ● Were deducted by the taxpayer or any other 50% in a qualified business. Figure the
housing, see section 1250(a)(1)(B) for the person as intangible drilling and development depreciation from the year it was placed in
percentage to use. costs under section 263(c). (Previously expensed service until the current year. See Pub. 463 and
mining costs that have been included in income Pub. 946.
Line 28d.—Enter the additional depreciation
upon reaching the producing state are not taken Line 37.—Subtract line 36 from line 35 and enter
after 1969 and before 1976. If straight line
into account in determining recapture.); and the recapture amount as “other income” on the
depreciation exceeds the actual depreciation for
the period after 1975, reduce line 28d by the ● Would have been reflected in the adjusted same form or schedule on which you took the
excess. Do not enter less than zero on line 28d. basis of the property if they had not been deduction. For example, if you took the
deducted. deduction on Schedule C (Form 1040), report the
Line 28f—Corporations subject to section
291.—The amount treated as ordinary income If the property was placed in service after recapture amount as other income on Schedule
under section 291 is 20% of the excess, if any, 1986, enter the total expenses that: C (Form 1040).
of the amount that would be treated as ordinary ● Were deducted under section 263, 616, or Note: If you filed Schedule C or F (Form 1040)
income if such property were section 1245 617 by the taxpayer or any other person; and and the property was used in both your trade or
property, over the amount treated as ordinary business and for the production of income, the
income under section 1250. If you used the ● Which, but for such deduction, would have portion attributable to your trade or business is
straight line method of depreciation, the ordinary been included in the basis of the property; plus subject to self-employment tax. Allocate the
income under section 291 is 20% of the amount ● The deduction under section 611 that reduced amount on line 37 before entering the recapture
figured under section 1245. the adjusted basis of such property. amount on the appropriate schedule.
Line 29—Section 1252 property.— Partnerships If you disposed of a portion of section 1254 Be sure to increase the basis of the property
should skip this section. Partners should enter property or an undivided interest in it, see by the recapture amount.
on the applicable lines of Part III amounts section 1254(a)(2).
subject to section 1252 according to instructions
from the partnership.

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