Taxpayers should report section 1231 transactions that do not meet the criteria that part III of form 4797 specifies on part I of the document, explains the IRS. Such transactions include the sales of business properties that taxpayers have owned for more than an year, and sales - or exchanges - involving horses and cattle that taxpayers have owned for at least 24 months and used for business. Further instructions on filling the document are available at the IRS website.
The IRS requires taxpayers to document gains wrung from the sale or exchange of business property on form 4797, reports Investopedia. Such property includes homes that taxpayers use for business and any properties they rent out. The IRS also requires taxpayers to report profits they've made from purveying minerals, geothermal resources, gas and oil on the document.
As of January 2016, the IRS organizes form 4797 into four sections, notes its website. The agency reserves part I for transactions, such as sale of timber or unharvested crops, that do not meet the requirements set out on part II or part III of the document. The next section, part II, is intended for transactions that fail to meet the criteria that the IRS has established for part I and part III of the document. Such transactions include sales involving properties that are not capital assets reportable on Schedule D, the capital gains and losses document alternatively known as form 1040. The IRS reserves part III for shareholders and partners reporting the sale of properties meeting certain criteria, and designed part IV for taxpayers who, after taking a previous expense reduction for certain properties, have experienced a decline of 50 percent or less in business use of the properties in question.