Part II

If a transaction is not reportable in Part I or Part III and the property is not a capital asset reportable on Schedule D, report the transaction in Part II.

If you received ordinary income from a sale or other disposition of your interest in a partnership, see Pub. 541, Partnerships.

Line 10 Report on line 10 ordinary gains and losses, not included on lines 11 through 16, including gains and losses from property held 1 year or less.

If you receive ordinary income from a sale or other disposition of property and deducted the cost of the property under the tangible property de minimis safe harbor, report the income on line 10.

Deduct the loss from a qualifying abandonment of business or investment property on line 10. See Abandonments in Pub. 544 for more information.

Gain or Loss From Certain Preferred Stock

Gain or loss recognized by any “applicable financial institution” from the sale or exchange of "any applicable preferred stock" is ordinary income or loss. An applicable financial institution includes:

• A financial institution defined in section 582(c)(2), and

• A depository institution holding company defined in section 3(w)(1) of the Federal Deposit Insurance Act.

Also, for this purpose, “applicable preferred stock” is preferred stock of the Federal National Mortgage Association (Fannie Mae), or the Federal Home Loan Mortgage Corporation (Freddie Mac) that was:

• Held by the applicable financial institution on September 6, 2008; or

• Sold or exchanged by the applicable financial institution after December 31, 2007, and before September 7, 2008.

In the case of a sale or exchange of applicable preferred stock after September 6, 2008, by a taxpayer that held such preferred stock on September 6, 2008, these provisions apply only where the taxpayer was an applicable financial institution at all times during the period beginning on September 6, 2008, and ending on the date of the sale or exchange of the applicable preferred stock. Therefore, any Fannie Mae or Freddie Mac preferred stock held by a taxpayer that was not an applicable financial institution on September 6, 2008, is not applicable preferred stock (even if such taxpayer subsequently became an applicable financial institution).

For guidance on preferred stock held indirectly by applicable financial institutions through partnerships and subsidiaries, see Rev. Proc. 2008-64, 2008-47 I.R.B. 1195, available at IRS.gov/irb/2008-47_IRB/ar12.html .

Deferred Gain From Qualifying Electric Transmission Transaction

If you sold or exchanged qualifying electric transmission property before January 1, 2008 (before January 1, 2021,

for a qualified electric utility), and elected to defer the realized gain, the deferred gain is recognized ratably over the 8-year period that began with the tax year that includes the date of the disposition. See section 451(k) for more information on making the election for qualifying transactions.

Include the applicable portion of the deferred gain for the current tax year on line 10. Enter “Deferred gain under section 451(k)” in column (a) and 1/8 of the deferred gain in column (g).

Securities or Commodities Held by a Trader Who Made a Mark-to-Market Election

Report on line 10 all gains and losses from sales and dispositions of securities or commodities held in connection with your trading business, including gains and losses from marking to market securities and commodities held at the end of the tax year (see Traders Who Made a Mark-to-Market Election , earlier). Attach to your tax return a statement, using the same format as line 10, showing the details of each transaction. Separately show and identify securities or commodities held and marked to market at the end of the year. On line 10, enter “Trader—see attached” in column (a) and the totals from the statement in columns (d), (f), and (g). Also, see the instructions for line 1, earlier.

Small Business Investment Company Stock

Report on line 10 ordinary losses from the sale or exchange (including worthlessness) of stock in a small business investment company operating under the Small Business Investment Act of 1958. See section 1242.

Also attach a statement that includes the name and address of the small business investment company and, if applicable, the reason the stock is worthless and the approximate date it became worthless.

Section 1244 (Small Business) Stock

Individuals report ordinary losses from the sale or exchange (including worthlessness) of section 1244 (small business) stock on line 10.

The maximum amount that may be treated as an ordinary loss on Form 4797 is $50,000 ($100,000 if married filing jointly). Special rules may limit the amount of your ordinary loss if (a) you received section 1244 stock in exchange for property with a basis in excess of its FMV, or (b) your stock basis increased because of contributions to capital or otherwise. See Pub. 550 for more details, including information on what is section 1244 (small business) stock.

Attach a computation of the loss from the sale or exchange of section 1244 property. On line 10, enter “Losses on Section 1244 (Small Business Stock)” in column (a), and enter the allowable loss in column (g). Report on Schedule D losses in excess of the maximum

8 Instructions for Form 4797 (2025)

amount that may be treated as an ordinary loss (and all gains) from the sale or exchange of section 1244 stock.

Keep adequate records to distinguish section 1244 stock from any other stock owned in the same corporation.

Line 18a You must complete this line if there is a gain on Form 4797, line 3; a loss on Form 4797, line 11; and a loss on Form 4684, line 35, column (b)(ii). Enter on this line the smaller of the loss on Form 4797, line 11, or the loss on Form 4684, line 35, column (b)(ii). To figure which loss is smaller, treat both losses as positive numbers. Enter the loss from income-producing property on Schedule A (Form 1040), line 16. Identify it as from “Form 4797, line 18a.” Do not include any loss from property used as an employee.