To report a loss on the sale of a rental property, you should use the following forms:
- Form 4797 (Sales of Business Property): This form is used to report the sale or exchange of real property used in your trade or business, which includes rental property. Specifically, Form 4797 is used to report the sale or exchange of depreciable and amortizable tangible property used in your trade or business. The form also covers the disposition of noncapital assets other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business.
- Form 8949 (Sales and Other Dispositions of Capital Assets): If the rental property is considered a capital asset, you may need to report the sale on Form 8949. This form is used to report the sale or exchange of capital assets not reported on another form or schedule. It is also used for gains from involuntary conversions (other than casualty or theft) of capital assets not used in your trade or business.
- Schedule D (Capital Gains and Losses): After completing Form 8949, you will use Schedule D to figure the overall gain or loss from transactions reported on Form 8949. Schedule D is used to report the overall capital gains and losses from transactions reported on Form 8949 and certain transactions that do not need to be reported on Form 8949.
- Form 8582 (Passive Activity Loss Limitations): If the rental property is a passive activity, you may need to use Form 8582 to figure out how much of the loss you can report. This form is used to report passive activity loss limitations and to determine the amount of passive activity loss that can be deducted.
In summary, to report a loss on the sale of a rental property, you will primarily use Form 4797, and potentially Form 8949 and Schedule D, depending on the nature of the property and the specifics of the transaction. If the rental property is a passive activity, Form 8582 may also be required to determine the allowable loss.
Sources:
2023 Instructions for Schedule D (2023)
Publication 544 (2023)
Instructions for Form 8582 (2023)
Instructions for Schedule D (Form 1041) (2023)
Publication 527 (2023)
Partner’s Instructions for Schedule K-1 (Form 1065) (2023)
Instructions for Form 4797 (2023)
