Form 4797 Use Form 4797 to report gain or loss from a sale, exchange, orinvoluntary conversion of property used in your trade or business orheld for the production of rents or royalties. Form 4797 can be usedwith Form 1040, 1065, 1120, or 1120S. Section 1231 gains and losses.Any section 1231 gains and losses are shown in Part I. A net gainis carried to Schedule D (Form 1040) as a long-term capital gain. Anet loss is carried to Part II of Form 4797 as an ordinary loss. If you had any nonrecaptured net section 1231 losses from thepreceding 5 tax years, reduce your net gain by those losses and reportthe amount of the reduction as an ordinary gain in Part II. Anyremaining gain is reported on Schedule D (Form 1040). See Section1231 Gains and Losses in chapter 3. Ordinary gains and losses.Any ordinary gains and losses are shown in Part II. This includes anet loss or a recapture of losses from prior years figured in Part Iof Form 4797. It also includes ordinary gain figured in Part III. Athens luxury hotelsOrdinary income from depreciation.The ordinary income from depreciation on personal property andadditional depreciation on real property (as discussed in chapter 3)is figured in Part III. The ordinary income is carried to Part II ofForm 4797 as an ordinary gain. Any remaining gain is carried to Part Ias section 1231 gain, unless it is from a casualty or theft. Anyremaining gain that is from a casualty or theft is carried to Form4684.