Is IRS Form 4797 Necessary On Sale of An Investor's Only Rental?

[Eli Comay]

I am an investor in a single rental property which I just sold.  I'll file IRS Form 8949 and Schedule D (with unrecaptured depreciation on line 19).  Is Form 4797 also required even though real estate is not my trade or business?

Publ. 544 includes: “Generally, gain from the sale or exchange of depreciable property not used in a trade or business but held for investment or for use in a not-for-profit activity is capital gain.  Generally, the gain is reported on Form 8949 and Schedule D.”

[Eamonn McElroy]

@Eli Comay

Are you sure your rental real estate activities don't rise to the level of a trade or business?

You don't have to be in a real estate trade or business personally for your rental(s) rise to the level of a trade or business.

Do you have positive net taxable income from the rental?  The QBI deduction is only available for trades or businesses.  Food for thought...

As for how to prepare your tax return, I don't think any CPA or EA here is going to give you specific advise on what you need to file or report without seeing all of your documentation and having a conversation with you.  We have various risks that we have to mitigate -- e.g. reputational and legal.

The pubs and instructions are usually helpful.  They do take a long time for the layman to go through, but that's why professionals exist.  Good luck!