Updated October 18, 2026. Quick answer: Line 10 holds ordinary gains and losses that do not belong on lines 11 through 16, including property held 1 year or less. Line 11 takes a loss from line 7 and line 12 takes the gain from line 7 or the amount from line 8. Line 17 later combines them.
What Part II is for
The instructions say “If a transaction is not reportable in Part I or Part III and the property is not a capital asset reportable on Schedule D, report the transaction in Part II.” This page is part of the Form 4797 walk-through.
Line 10: ordinary gains and losses
The form’s caption is “Ordinary gains and losses not included on lines 11 through 16 (include property held 1 year or less):” The instructions say “Report on line 10 ordinary gains and losses, not included on lines 11 through 16, including gains and losses from property held 1 year or less.” They add “If you receive ordinary income from a sale or other disposition of property and deducted the cost of the property under the tangible property de minimis safe harbor, report the income on line 10.”
Property that is a capital asset belongs elsewhere; capital asset sales are covered at Form 8949.
Line 10: traders with a mark-to-market election
For a trader the instructions say “Report on line 10 all gains and losses from sales and dispositions of securities or commodities held in connection with your trading business, including gains and losses from marking to market securities and commodities held at the end of the tax year”. They also say “Attach to your tax return a statement, using the same format as line 10, showing the details of each transaction.” The proceeds side is on line 1a, covered on the lines 1a to 1c page.
Line 10: stock losses
For small business investment company stock the instructions say “Report on line 10 ordinary losses from the sale or exchange (including worthlessness) of stock in a small business investment company operating under the Small Business Investment Act of 1958.”
For section 1244 stock they say “Individuals report ordinary losses from the sale or exchange (including worthlessness) of section 1244 (small business) stock on line 10.” The dollar cap reads “The maximum amount that may be treated as an ordinary loss on Form 4797 is $50,000 ($100,000 if married filing jointly).” They also require “Attach a computation of the loss from the sale or exchange of section 1244 property.”
Lines 11 and 12: fed from line 7 and line 8
The instructions have no separate paragraph for lines 11 and 12, so the form’s captions guide them. Line 11 reads “Loss, if any, from line 7” and line 12 reads “Gain, if any, from line 7 or amount from line 8, if applicable”. The routing comes from line 7: “If line 7 is zero or a loss, enter the amount from line 7 on line 11 below and skip lines 8 and 9.” The line 12 case after prior-year losses is spelled out in the instructions: “The entire $2,000 net section 1231 gain on line 7 is treated as ordinary income and is entered on line 12 of Form 4797.” That is the IRS example on the lines 7 to 9 page. Losses are shown in parentheses; the instructions say “To show losses, enclose figures in (parentheses).”
Where the number comes from
Line 10 rows come from your own records of each sale: the property, the sale price, the depreciation and the cost. Lines 11 and 12 are not figured on their own. They carry the result of Part I from the lines 7 to 9 page. Business gains flow into your return through Schedule 1; the lines are explained at Schedule 1 lines 3 to 6.
Where it goes next
Line 17 says “Combine lines 10 through 16.” Line 18 then says “For all except individual returns, enter the amount from line 17 on the appropriate line of your return and skip lines a and b below.” Lines 13 to 18 are on the lines 13 to 18 page.
Edition and line numbers
This page reads the 2025 Form 4797, Sales of Business Property and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The form’s own header says “Attach to your tax return.” Check the tax year printed on the form you are filling in and use the line numbers on that year’s form, because a different year’s form can number or word its lines differently.
Common mistakes
- Putting a capital asset on line 10. The instructions say Part II is for property that “is not a capital asset reportable on Schedule D”.
- Leaving off the trader statement. The instructions say “Attach to your tax return a statement, using the same format as line 10, showing the details of each transaction.”
- Entering a line 7 loss on line 12. The form sends it to line 11: “If line 7 is zero or a loss, enter the amount from line 7 on line 11 below and skip lines 8 and 9.”
Related: Form 4797, Form 8949, Schedule 1 lines 3 to 6, Form 1040 line by line, and Form 4797 lines 7 to 9.
Sources
- Instructions for Form 4797, Sales of Business Property (2025): https://www.irs.gov/pub/irs-pdf/i4797.pdf
- Form 4797, Sales of Business Property (2025): https://www.irs.gov/pub/irs-pdf/f4797.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.