[Manuelo]

Ok, I know short-term losses are not deductible on Form 1065 for a partnership. This loss passes on to the partner in the K-1 form.

BUT

If you look at form 1065, Line 7 where it says “Net gain (loss) from Form 4797″…what loss is this referring to?

[gans555]

Form 4797 is the sale of business property. This can be either real estate or personal property used in a trade or business. Basically, it's the form where section 1231, 1245, 1250, and 291 assets go. Also, sale of qualified small business stock goes on here too. It goes on form 1065 to the extent of ordinary income (recapture). The special treatment (capital gains or ordinary loss) goes on Schedule K-1.

Hope this helps

[Author]

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