Why it matters
The sale of business property is not reported like a stock sale. Depreciation taken on the asset can be recaptured as ordinary income, so the preparer needs the depreciation history and the sale documents.
Example
A client sells a delivery van used in the business. The preparer reports the sale on Form 4797, compares the sale price with the adjusted basis and calculates any depreciation recapture.
Related terms
Questions about Form 4797
Is the sale of business equipment a capital gain?
Part of it can be. The gain up to the depreciation taken may be recaptured as ordinary income, and the remaining gain may be treated as capital. Form 4797 makes the split.
What records does the client need?
The purchase invoice, the depreciation schedule and the sale document. Without the depreciation history, the preparer cannot calculate the adjusted basis or the recapture.