1041-US: Reporting gain when depreciation is recaptured on Form 4797 (FAQ)

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Question

How is a gain from an asset disposed of in a casualty or theft reported when there is depreciation recaptured on Form 4797?

Answer

If you have a long-term gain from a casualty or theft of depreciable property, you may have to recapture part or all of the gain as ordinary income and report the gain on Form 4797, Part III. To report the gain on Form 4797, Part III, enter X in the Gain reported on Form 4797, Part III field on Screen 4684B. You also need to enter the casualty or theft on Screen Sale; enter X in the Disposition due to casualty / theft field. When all or part of the gain must be recaptured, the capital portion will be reported on Form 4684, line 33, and the ordinary portion of the gain will be reported on Form 4797, line 13.

Related topic: 1041-US: Casualties and thefts FAQs

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