Sales, Trades, Exchanges
Question: We sold a rental property last year and used the like-kind exchange rules under section 1031 of the 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?
Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges. The Instructions for Form 8824 explain how to report the details of the exchange. Even if you recognize no gain or loss, you must report the exchange.
If you received money or other property (not like-kind) as part of the exchange, you must recognize gain to the extent of the amount of money or the value of other property you received, but you don't recognize a loss. For this purpose, consideration received by a taxpayer in the form of an assumption of a liability by the other party to the exchange or the transfer by the taxpayer of property subject to a liability is treated as money or other property. However, a taxpayer may offset a liability assumed with consideration given by the taxpayer assuming a liability or receiving a property subject to a liability in the exchange. You must report recognized gain on Form 4797, Sales of Business Property, and Schedule D (Form 1040), Capital Gains and Losses. Refer to the detailed section on qualifying like-kind exchanges in Chapter 1, Gain or Loss, in Publication 544, Sales and Other Dispositions of Assets.
Category: Sale or Trade of Business, Depreciation, Rentals
Subcategory: Sales, Trades, Exchanges