Mastering Form 4797: business property made simpleBy: National Association of Tax Professionals
August 11, 2025

Selling a business interest often involves real estate and equipment, each with its own reporting rules. If proceeds aren’t allocated properly, the return can be inaccurate, and the client may face unexpected tax consequences.

By strengthening your understanding of how these components interact on Form 4797, you can prepare more accurate filings and offer clients clear guidance during high-stakes transactions.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: What is Section 1250 property, and how is the gain on its sale treated?

A: Section 1250 property generally refers to depreciable real property, such as buildings and structural components. Gain attributable to straight-line depreciation is taxed as unrecaptured Section 1250 gain at a maximum rate of 25% [§1250].

Q: Why is a desk considered Section 1245 property?

A: A desk is classified as tangible personal property (equipment or furniture) used in a trade or business and is not a structural component of a building; therefore, it is Section 1245 property [§1245].

Q: How is a water tank installed on a ranch classified?

A: A water tank’s classification depends on how it is installed. Generally, if it is a structural component or permanently affixed to land, it may be Section 1250 property. Otherwise, it may be considered Section 1245 property if it functions as equipment [§1245, §1250].

Q: What is the tax treatment when selling fully depreciated property for a gain?

A: When fully depreciated property with a zero adjusted basis is sold, the entire sale prices are treated as gain. For Section 1245 property, this gain is recaptured as ordinary income up to prior depreciation [§1245].

To learn more about mastering Form 4797, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

Tax education
Form 4797
Business property
Real estate
Depreciation
Business asset
Read more
penAbout National Association of Tax Professionals

The National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.

The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.

Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.

Additional Articles

Categories