Knowledge Base

10748: Form 4797 - Part IV Recapture Unneeded for Assets Sold

Fed Returns Generally

I sold a business asset and need to recapture Section 179 expense. Why is it that when I complete the 4797, I can’t get the information to flow to Part IV?

Part IV is for assets that have not been sold, but the business use for which has dropped to 50% or less. This is typically a situation that occurs when you still own assets for a business that no longer exists.

Your business is still operating. When you enter the sale of an asset on Form 4797, the software calculates your gain from the sale. That calculation includes consideration of your prior depreciation as part of the basis of the asset sold. That includes consideration of Section 179 expense. If the sale results in a gain, the gain is taxable income. Thus, in a sale, there is no need to report information from the sale on Part IV for recapture, because the mechanics of the sale make recapture unnecessary.

Part IV information can be entered directly on screen 4797. It also can flow from screen 4562, when the box is checked for Recapture because business use dropped to 50% or less.

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