LynnN82
Expert Alumni

Business & farm

Sale of working interest in an Oil and Gas lease is a sale of the well equipment, which is personal property, and an interest in the lease which is real property. Sale proceeds should be allocated between the two assets. sale of the lease is reported on Schedule D. Sale of the equipment is reported in Form 4797. You may recognize ordinary income from sale of the equipment, while sale of the real property will produce a capital gain or loss.