Common questions about Form 4797 in Lacerte

This article will help you with frequently asked questions about Form 4797 in Lacerte.

Table of contents:

Why isn't my sale flowing to Form 4797?

Check your Informational diagnostics and review any that refer to a disposition or depreciable asset. These will alert you if a disposition is being ignored or not producing a 4797 for common reasons, like a sale date that falls after the end of the tax year.

Asset sales are reported on Form 4797 Part III only if the sale results in a gain.

For individual and corporate returns

If the asset was entered on the depreciation screen:

1. Go to Screen 22, Depreciation and select the asset.
2. Scroll to the Additional Information section.
3. Make sure there is not a 1 in 1 = delete this year, 2 = delete next year.  If a 1 is entered, the program will ignore the asset.
4. Scroll down to the General Disposition Information section.
5. Verify the date entered in Date sold, disposed, or retired.
   • Make sure the date falls within the year for which you're preparing this return.
6. Verify you have an entry in Sales price.

If the asset was entered on the dispositions screen:

1. Go to Screen 17, Dispositions and select the asset.
2. Verify all of the required fields have been completed:
   • Description of property
   • Date acquired
   • Date sold
   • Sales price
   • Cost or other basis
   • Depreciation allowed
3. Scroll to the Form 4797 section.
4. Verify an amount is entered in Depreciation allowed (-1=none, triggers 4797).

For partnership and S corporate returns

If there is prior section 179 on the asset(s), the information will print as a separately stated item on the Schedule K/K-1 in the other information section and will not flow to Form 4797.

How do I enter a K-1 disposition for line 10?

1. Go to Screen 20, Passthrough K-1s.
2. Select the K-1 activity.
3. Scroll down to Line 11 - Other Income for a 1065 K-1, or Line 10 - Other Income for an S corp K-1.
4. Enter the amount in Ordinary gain (loss) to be reported on 4797, line 10 or Passive ordinary gain (loss) to be reported on 4797, line 10.

Where do I enter recapture when business use drops under 50% for Part IV?

1. Go to Screen 17, Dispositions.
2. Click on the Carryovers/Misc button.
3. Scroll down to the Form 4797 section.
4. Locate the Recapture 50% or Less Business Use heading.
5. Enter the amount you want to print on line 33(a) in Section 179 expense deduction.
6. Enter the amount you want to print on line 34(a) in Depreciation allowable.

Lacerte will generate a diagnostic reminding you that income from the recapture must be manually entered as other income on the form or schedule that originally took the deduction. See Troubleshooting diagnostic ref. 2025063 – Recapture amounts from Form 4797, Part IV for more info.

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How do I report business bad debt?

1. Go to Screen 17, Dispositions
2. Enter the applicable information regarding the sale (Description, date acquired, date sold, sales price, cost or basis)
3. Scroll down to the Form 4797 section
4. Enter an amount of prior deprecation or -1 in the field labeled Deprecation Allowed (-1 = none, triggers 4797).

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Where do you enter Sale of Section 1244 Stock for an Individual return?

Section 1244 Stock is entered in the Disposition screen:

1. Enter the sale information as you would for a normal stock sale in Screen 17, Dispositions.
2. Check the box Section 1244 stock in the Schedule D section.

Note:  Losses carry to Form 4797, Part II. Gains carry to Schedule D. The program limits section 1244 stock losses to the acceptable IRS limits on an activity-by-activity basis. If you enter multiple section 1244 losses, the program does not limit the aggregate. You must apply this limitation manually.

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