Updated October 18, 2026. Quick answer: Line 2 is where you list each Part I sale, one row per property, and column (g) holds the gain or loss. Lines 3 to 6 bring in amounts from Form 4684, Form 6252, Form 8824 and Part III line 32. Line 7 then combines them.
S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S Schedule K lines 5 to 10.
Partnership return (Form 1065) for 2025, read line by line: Form 1065 lines 4 to 8 and Form 1065 Schedule K lines 5 to 11.
What Part I is for
The instructions open the Part with “Use Part I to report section 1231 transactions that are not required to be reported in Part III.” The first transaction they list is “Sales or exchanges of real or depreciable property used in a trade or business and held for more than 1 year.” The form’s Part I heading ends with “Most Property Held More Than 1 Year”. There is also a chart in the instructions, Where To Make First Entry for Certain Items Reported on This Form, that shows which Part a type of property is entered in first. This page is part of the Form 4797 walk-through.
Line 2: one row for each property
The instructions have no separate paragraph for line 2, so the form’s own column captions are the guide. They are “Gross sales price” in column (d), “Depreciation allowed or allowable since acquisition” in column (e), “Cost or other basis, plus improvements and expense of sale” in column (f), and in column (g) “Subtract (f) from the sum of (d) and (e)”.
As a computed illustration, not an IRS example: with a column (d) amount of $50,000 and a column (e) amount of $20,000, the sum is $70,000. With a computed column (f) amount of $60,000, column (g) is $10,000, a gain. The instructions add “To show losses, enclose figures in (parentheses).”
Columns (a), (b) and (c)
Column (b) is the date acquired. For property that came to you from an estate, the instructions say “enter “INHERITED” in column (b) instead of the date you acquired the property.” What happens to rental property you inherit is explained at inheriting a rental. Column (a) is the description and column (c) is the date sold.
Land and buildings sold together
A building and the land under it can go in different Parts. The instructions say “you must allocate the amount realized between the two types of property based on their respective fair market values (FMVs)”, and then “For example, for property held more than 1 year, report the sale of a building in Part III and the land in Part I.” The Part III side of that split is on the lines 19 to 24 page.
Lines 3 to 6: amounts brought in from other forms
The captions read “Gain, if any, from Form 4684, line 39” for line 3, “Section 1231 gain from installment sales from Form 6252, line 26 or 37” for line 4, “Section 1231 gain or (loss) from likekind exchanges from Form 8824” for line 5, and “Gain, if any, from line 32, from other than casualty or theft” for line 6.
The instructions name the forms behind these lines: “Use Form 4684, to report involuntary conversions from casualties and thefts.” For line 5 they say “For exchanges of real property used in a trade or business (and other noncapital assets), enter the gain or (loss) from Form 8824, if any, on Form 4797, line 5 or line 16.” Form 8824 has its own page at Form 8824, and Form 4684 is at Form 4684.
Where the number comes from
The line 2 rows come from your sale records: the closing or bill-of-sale figures for the price, your depreciation records for column (e) and your basis records for column (f). Lines 3 to 5 are copied from the other forms named in their captions. Line 6 comes from the bottom of Part III, where line 32 says “Subtract line 31 from line 30.” and “Enter the portion from other than casualty or theft on Form 4797, line 6”.
Where it goes next
Line 7 says “Combine lines 2 through 6.” What to do with the result is on the lines 7 to 9 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
- Reporting in Part I something Part III has to handle. The instructions say “Use Part I to report section 1231 transactions that are not required to be reported in Part III.”
- Showing a loss as a positive number. The instructions say “To show losses, enclose figures in (parentheses).”
- Putting a building and its land on one row. The instructions say “report the sale of a building in Part III and the land in Part I.”
Related: Form 4797, Form 8824, Form 4684, inheriting a rental, 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.