Like-kind Exchange

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turbotax 1031 exchange

Do not enter any “sales information”. I continue to the question “Did you stop using the asset?” and I answer Yes since the property was taken out of rental service. Beginning in 2018, like-kind exchanges can only be used for real property such as real estate.

Failing to meet these deadlines may cause the sale of the property to be recognized in the current tax year. Frankly, you should try contacting Support, via the link below, since you appear to be struggling with getting the exchange entered properly.

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a “like-kind exchange,” and it lets you delay some or all of the tax effects. The Internal Revenue Service uses Form 8824 for like-kind exchanges. To enter this exchange and figure the basis for the asset received, select Topic List in the toolbar at the top of the screen, scroll to the Income category, then choose the Other Income topic.

I’m assuming TurboTax is somehow calculating more losses based on the depreciating assets/bonus depreciations I’ve entered for the property. If you open forms mode, the 8824 form has a link to a specific Schedule E property. I have never figured out what this does, but it does not cause the assets for the property to correctly report partial year depreciation, and link the resulting basis to the 8824. I’ll try this approach and if it doesn’t work I’ll update this thread.

Exchange With Multiple Properties Does Not Properly Defer Capital Gain

I appreciate any advice on how to enter this information correctly. Eventually, I get to a Sales Information dialog for entering Prices and Expenses for both Assets and Land.

turbotax 1031 exchange

You may use TurboTax Online without charge up to the point you decide to print or electronically file your tax return. Printing or electronically filing your return reflects your satisfaction with TurboTax Online, at which time you will be required to pay or register for the product. For simple tax returns only, file fed and state taxes free, plus get a free expert review with TurboTax Live Basic. I’m having the exact issue and none of these answers has helped me. I do not get an option for anything related to a like kind exchange when I select special handling. TurboTax does not actually support this type of exchange but Support has been able to walk some users through the procedure and troubleshoot any input errors. I just finished my taxes but not sure if these calculations are correct.

That’s what I have always done, but I have not used the new “carry forward basis” to calculate the depreciation on the replacement property. In years past, Turbo Tax said to print out the 8824 for your records so that someday when you sell the replacement property you would have the “adjusted basis” to use when calculating the gain. For example, property cost $180K, but the adjusted basis resulting from the exchange deferment is $42K. For simple purposes say the structure is $140K (78%) and would be depreciated over 27.5 years, or $5,091/yr. If I use $42K as the cost the annual depreciation would drop to $1,191; obviously a huge difference. I sold a rental property, did a 1031 exchange, and purchased a replacement rental property. I am having trouble reporting the whole process to TurboTax, in particular the sale of the old rental property.

This produces the underlying Form 8824 for the exchange and it seems to have good information on it, including the deferred gain and basis for the new rental property. Should I not have told it under the Rental Income section that I sold that property? That’s when it started charging the tax due on the sale and now continues to charge it when I also enter the information under like-kind exchange. So, following this advice, I entered the renovation assets and entered them as sold on the same date the property was sold. The result produced zero depreciation and calculated the allocated gain for each asset.

I Sold A Rental Property Through A 1031 Exchange Where In Turbotax Do I Enter The Like

Regardless, you should be reporting your 1031 exchange on Form 8824 and it appears as if you might be entering the transaction in the wrong section of the program. I see that the two entries amount to the improvements and the current list of depreciating assets. The second entry is the land amount, when I purchased the property. No, do not report that the property relinquished was sold; indicate the property was given away as of the date of the exchange. We never received the sales funds directly because we used OREXCO as the intermediary. For that matter, another “bug” is that there is a checkbox where a user can link an exchange to a business or a rental but checking that box actually does next to nothing. Any boot calculations simply has to come out of the program based on the input, it can’t be coming from the user.

If your personal property, appliances, etc. fall within this parameter then you only have to address a single LKE transaction. In general, if you have real and personal property you need to determine exchange groups. Properties are of like kind if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. It uses information you have put into the other fields on the Form 8824 to calculate possible gain on the exchange. For a summary 8824, how do you force TT to let you enter the gain on line 23?

  • Your relinquished property has some personal property and I assume that the replacement property has some as well.
  • I do use TurboTax Premier on my desk top and have tried to fill in form 8824, but some questions were very vague and after looking on the filled out form I just double my taxes!
  • But you can’t proceed through the interview until you put something in there.
  • Click on the Add an Exchange button and follow the prompts to add the next like kind exchange.
  • The primary form you prepare for a 1031 exchange is Form 8824.

I cant figure out why Turbo Tax form 1040 is doing this. Any suggestions or recommendations is much appreciated. How are the depreciating assets calculated in the sale of a property that is relinquished in a like-kind exchange? This is giving me a huge tax boost to see this negative number as it is offseting my rental income gains. I just don’t want to deal with the IRS later on, if this is invalid. Then report the 1031 exchange under sale of business property. Under Business Items, Sale of Business Property, I enter the like-kind exchange information.

Where Do I File My 1031 Exchange?

Using the TurboTax online edition you will need the Premier edition or higher for a Form 8824. Please tell me what steps to take to have turbotax remove the tax on my declared like-kind exchange. The property I relinquished in the like-kind exchange is being reported in form 4797, “Sale of Business Property”. I have a rental property received, HUD statements for buying and selling the property . I had a significant loss with the sale of property B. I have completed my tax return except for the 1031 exchange; I actually got a refund at that point.

turbotax 1031 exchange

When it comes to 1031 exchanges, I’m dumber than a rock. I just don’t have any experience in this or any knowledge about 1031 exchanges. TT wants to delete the properties from 2019 return, as they were not rented. Capitalize those improvement expenses as part of the basis for each of the properties.

When I do this, it shows a capital gain and increases my tax-burden. You may file only a summary Form 8824 and attach your own statement showing all the information requested on Form 8824 for each exchange. Include your name and identifying number at the top of each page of the statement. Further more, for the property received in exchange, once you have properly completed the 8824 form, you will have the basis for the new property. This is most likely not the purchase price. You need to go back to the schedule E and enter this new property, using this basis for future depreciation. These two statements are difficult to reconcile.

That “Different property received” page, to my mind, is very clearly asking about “other property” (not like-kind) that a user is able to identify and there simply isn’t any. But you can’t proceed through the interview until you put something in there. It’s not clear to me if the $4,000 should be taxed as gain since the FMV of the property acquired was slightly less than the FMV of the property relinquished. She asked for my help because the program, on the page “Different property received”, was asking for what seems to be a “balancing” amount of “other (not like-kind) property.” I’m helping my daughter with her Starker exchange . This is an area where I’d say I have a general understanding of the tax concepts but have never actually prepared a Form 8824. To a large extent the instructions for Form 8824 are vague and somewhat contradictory to what you see presented on the form itself.

Leave that box blank because you did not assume any loans when you acquired the property (i.e., it appears that you secured a new loan). You might want to try entering the transaction by starting with typing “like kind” in the Search box and clicking the “Jump to” link. Doing so will take you to the screen in the screenshot below where the program will walk you through the entire transaction. Why are we paying for the upgraded software if it doesn’t work? Having said that, you should start by entering the words “like kind” into the search box and then clicking the “Jump to like kind” link. At the very first screen thereafter, be sure to check the box as shown in the screenshot below and then proceed through the entire section carefully reading the information on each screen.