Which Asset Sales Are Reported?

Sales of inventory or other items held as stock-in-trade in your business are considered business income, not sales of capital assets. Sales of this type of property are reported on Schedule C or C-EZ. Similarly, sales of accounts receivable or notes you received in the ordinary course of business are reported on Schedule C, as are any sales of copyrighted literary or musical compositions or artwork you created. There is one exception. You may elect to treat the sale of musical composition as a capital asset and take advantage of the capital gains rates. In that case, the sale is reported on Schedule D.

If you have a gain on property held for personal use such as a home, car, furnishings, clothing, etc., it is reported on Schedule D (but see our discussion of the exemption for gains on personal residences). However, if you have a loss, you can't deduct it. If you do have a loss on non-real estate property held for personal use, you don't have to report the sale at all.

Virtually any property that you hold as an investment will generate a taxable gain, or a deductible loss, that should be reported on Schedule D and on one of the more specialized forms that feed into Schedule D:

• Form 8949, for all sales not reported on another form
• Form 4797, for sales of property used in a trade or business
• Form 4684, for involuntary conversions of nonbusiness property due to casualties or theft
• Form 8824, if you made one or more like-kind exchanges
• Form 6781, if you had gains or losses from Section 1256 contracts and straddles (these are generally regulated futures contracts, foreign currency contracts, and certain options contracts, or hedging positions; for more information, see IRS Publication 550, Investment Income and Expenses)
• Form 6252, if you received payments for the asset over more than one year (but installment sale treatment is not permitted for stocks, bonds, and other securities sold by cash-basis taxpayers)

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