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Sales, Trades, Exchanges

Question: We sold a rental property last year and used the like-kind exchange rules under section 1031 of Internal Revenue Code to purchase a replacement property and defer the gain of the rental property sold. How do I report this transaction on my tax return?

Answer:

Report the exchange of like-kind property on Form 8824 (PDF), Like-Kind Exchanges. The Instructions for Form 8824 (PDF) explain how to report the details of the exchange. Even though no gain or loss is recognized, you must report the exchange.

If you received money or other property (not like-kind) as part of the exchange, gain is recognized to the extent of the other property and money received, but a loss is not recognized.  You must report recognized gain on Form 4797 (PDF), Sales of Business Property, and Schedule D (Form 1040) (PDF), Capital Gains and Losses. Refer to Chapter 1, Gain or Loss, in Publication 544, Sales and Other Dispositions of Assets, which has a detailed section on qualifying like-kind exchanges.

Additional Information:


Category: Sale or Trade of Business, Depreciation, Rentals
Subcategory: Sales, Trades, Exchanges

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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