Instructions for Form 8824 (2017)

Like-Kind Exchanges(and section 1043 conflict-of-interest sales)

Section references are to the Internal Revenue Code unless otherwise noted.

2017


General Instructions

Future developments.

For the latest information about developments related to Form 8824 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form8824.

Purpose of Form

Use Parts I, II, and III of Form 8824 to report each exchange of business or investment property for property of a like kind. Form 8824 figures the amount of gain deferred as a result of a like-kind exchange. Part III computes the amount of gain required to be reported on the tax return in the current year if cash or property that isn't like kind is involved in the exchange. Also, the basis of the like-kind property received is figured on Form 8824.

Certain members of the executive branch of the Federal Government and judicial officers of the Federal Government use Part IV to elect to defer gain on conflict-of-interest sales. Judicial officers of the Federal Government are the following:

  1. Chief Justice of the United States.

  2. Associate Justices of the Supreme Court.

  3. Judges of the:

    1. United States courts of appeals,

    2. United States district courts, including the district courts in Guam, the Northern Mariana Islands, and the Virgin Islands,

    3. Court of Appeals for the Federal Circuit,

    4. Court of International Trade,

    5. Tax Court,

    6. Court of Federal Claims,

    7. Court of Appeals for Veterans Claims,

    8. United States Court of Appeals for the Armed Forces, and

    9. Any court created by Act of Congress, the judges of which are entitled to hold office during good behavior.

 

Multiple exchanges.

If you made more than one like-kind exchange, you can file a summary on one 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. On the summary Form 8824, enter only your name and identifying number, "Summary" on line 1, the total recognized gain from all exchanges on line 23, and the total basis of all like-kind property received on line 25.

When To File

If during the current tax year you transferred property to another party in a like-kind exchange, you must file Form 8824 with your tax return for that year. Also file Form 8824 for the 2 years following the year of a related party exchange. See the instructions for Line 7, later, for details.

Like-Kind Exchanges

Generally, if you exchange business or investment property solely for business or investment property of a like kind, section 1031 provides that no gain or loss is recognized. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss isn't recognized.

Section 1031 doesn’t apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, interests in a partnership, certificates of trust or beneficial interests, or certain other assets. See section 1031(a)(2). In addition, section 1031 doesn't apply to certain exchanges involving tax-exempt use property subject to a lease. See section 470(e)(4).

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If you exchanged stock in a mutual ditch, reservoir, or irrigation company, see the discussion later.

Like-kind property.

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.

Property that is exchanged for a different type of property or class of property won't qualify as like-kind property. Livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties. See Pub. 544, Sales and Other Dispositions of Assets, for more details.

Generally, real properties are like-kind properties, regardless of whether they are improved or unimproved. However, real property in the United States and real property outside the United States aren't like-kind properties.

Deferred exchanges.

A deferred exchange occurs when the property received in the exchange is received after the transfer of the property given up. For a deferred exchange to qualify as like kind, you must comply with the timing requirements for identification and receipt of replacement property. The replacement property for the exchange must be identified within 45 days after the property being given up is transferred. The replacement property must be received within 180 days, or by the due date of the tax return including extensions, whichever is earlier. See the instructions for Line 5 and Line 6, later, for more details.

If you make a deferred exchange using a qualified intermediary (QI), the transfer of the property given up and receipt of like-kind property is treated as a like-kind exchange. If you fail to meet the timing requirements because of the QI, your transaction won't qualify as a deferred exchange and any gain may be taxable in the year you transferred the property. However, if the QI defaults on its obligation to acquire and transfer replacement property because of bankruptcy or receivership proceedings and you meet certain requirements, you may be able to report the gain in the year or years payments are received. For the requirements, see Rev. Proc. 2010-14, 2010-12 I.R.B. 456, available at www.irs.gov/irb/2010-12_IRB/ar07.html.

Multi-asset exchanges.

A multi-asset exchange involves the transfer and receipt of more than one group of like-kind properties. For example, an exchange of land, vehicles, and cash for land and vehicles is a multi-asset exchange. An exchange of land, vehicles, and cash for land only isn't a multi-asset exchange. The transfer or receipt of multiple properties within one like-kind group is also a multi-asset exchange. Special rules apply when figuring the amount of gain recognized and your basis in properties received in a multi-asset exchange. For details, see Regulations section 1.1031(j)-1.

Reporting of multi-asset exchanges.

If you transferred and received (a) more than one group of like-kind properties or (b) cash or other (not like-kind) property, don't complete lines 12 through 18 of Form 8824. Instead, attach your own statement showing how you figured the realized and recognized gain, and enter the correct amount on lines 19 through 25. Report any recognized gains on your Schedule D; Form 4797, Sales of Business Property; or Form 6252, Installment Sale Income, whichever applies.

Exchanges using a qualified exchange accommodation arrangement (QEAA).

If property is transferred to an exchange accommodation titleholder (EAT) and held in a QEAA, the EAT may be treated as the beneficial owner of the property, the property transferred from the EAT to you may be treated as property you received in an exchange, and the property you transferred to the EAT may be treated as property you gave up in an exchange. This may be true even if the property you are to receive is transferred to the EAT before you transfer the property you are giving up. However, the property transferred to you can't be treated as property received in an exchange if you previously owned it within 180 days of its transfer to the EAT. For details, see Rev. Proc. 2000-37 as modified by Rev. Proc. 2004-51. Rev. Proc. 2000-37 is on page 308 of Internal Revenue Bulletin 2000-40 at www.irs.gov/pub/irs-irbs/irb00-40.pdf. Rev. Proc. 2004-51, 2004-33 I.R.B. 294, is available at www.irs.gov/irb/2004-33_IRB/ar13.html.

Property used as home.

If the property given up was owned and used as your home for at least a total of two years during the 5-year period ending on the date of the exchange, you may be able to exclude part or all of any gain figured on Form 8824. For details on the exclusion of gain (including how to figure the amount of the exclusion), see Pub. 523, Selling Your Home. Fill out Form 8824 according to its instructions, with these exceptions:

  1. Subtract line 18 from line 17. Enter that result on line 19. On the dotted line next to line 19, enter "Section 121 exclusion" and the amount of the exclusion.

  2. On line 20, enter the smaller of:

    1. Line 15 minus the exclusion, or

    2. Line 19.

      Don't enter less than zero.

  3. Subtract line 15 from the sum of lines 18 and 23. Add the amount of your exclusion to the result. Enter that sum on line 25.

 

Property used partly as home.

If the property given up was used partly as a home, and partly for business or investment, you will need to use two separate Forms 8824 as worksheets. Use one worksheet for the part of the property used as a home, and the other worksheet for the part used for business or investment. Fill out only lines 15 through 25 of each worksheet Form 8824. On the worksheet Form 8824 for the part of the property used as a home, follow steps (1) through (3) above, except that instead of following step (2), enter the amount from line 19 on line 20. On the worksheet Form 8824 for the part of the property used for business or investment, follow steps (1) through (3) above only if you can exclude at least part of any gain from the exchange of that part of the property; otherwise, complete the form according to its instructions. Enter the combined amounts from lines 15 through 25 of both worksheet Forms 8824 on the Form 8824 you file. Don't file either worksheet with Form 8824.

More information.

For details, see Rev. Proc. 2005-14, 2005-7 I.R.B. 528, available at www.irs.gov/irb/2005-7_IRB/ar10.html.

Exchange of stock in a mutual ditch, reservoir, or irrigation company.

The exchange of stock in a mutual ditch, reservoir, or irrigation company may qualify for the nonrecognition of gain or loss under section 1031.

The nonrecognition of gain or loss on the exchange may apply if, at the time of the exchange:

  1. The company is a section 501(c)(12)(A) organization (determined without regard to the percentage of income collected from members for the purpose of meeting losses and expenses), and

  2. The shares of stock in the company have been recognized by the highest court in the state in which the company was organized or by an applicable statute of that state as constituting or representing real property or an interest in real property.

 

Additional information.

For more information on like-kind exchanges, see section 1031 and its regulations and Pub. 544.

Specific Instructions

Lines 1 and 2.

For real property, enter the address and type of property. For personal property, enter a short description. For property located outside the United States, include the country.

Line 5.

Enter on line 5 the date of the written identification of the like-kind property you received in a deferred exchange. To comply with the 45-day written identification requirement, the following conditions must be met.

  1. The like-kind property you receive in a deferred exchange is designated in writing as replacement property either in a document you signed or in a written agreement signed by all parties to the exchange.

  2. The document or agreement describes the replacement property in a clear and recognizable manner. Real property should be described using a legal description, street address, or distinguishable name (for example, "Mayfair Apartment Building").

  3. No later than 45 days after the date you transferred the property you gave up:

    1. You send, fax, or hand deliver the document you signed to the person required to transfer the replacement property to you (including a disqualified person) or to another person involved in the exchange (other than a disqualified person), or

    2. All parties to the exchange sign the written agreement designating the replacement property.

 

Generally, a disqualified person is either your agent at the time of the transaction or a person related to you. For more details, see Regulations section 1.1031(k)-1(k).

 

Note.

If you received the replacement property before the end of the 45-day period, you automatically are treated as having met the 45-day written identification requirement. In this case, enter on line 5 the date you received the replacement property.

 

Line 6.

Enter on line 6 the date you received the like-kind property from the other party.

The property must be received by the earlier of the following dates.

  • The 180th day after the date you transferred the property given up in the exchange.

  • The due date (including extensions) of your tax return for the year in which you transferred the property given up.

 

Line 7.

Special rules apply to like-kind exchanges made with related parties, either directly or indirectly. A related party includes your spouse, child, grandchild, parent, grandparent, brother, sister, or a related corporation, S corporation, partnership, trust, estate, or tax-exempt organization. See section 1031(f).

An exchange made indirectly with a related party includes:

  • An exchange made with a related party through an intermediary (such as a qualified intermediary or an exchange accommodation titleholder, as defined in Pub. 544), or

  • An exchange made by a disregarded entity (such as a single member limited liability company) if you or a related party owned that entity.

 

An exchange structured to avoid the related party rules isn't a like-kind exchange. Don't report it on Form 8824. Instead, you should report the disposition of the property given up as if the exchange had been a sale. See section 1031(f)(4). Such an exchange includes the transfer of property you gave up to a qualified intermediary in exchange for property you received that was formerly owned by a related party if the related party received cash or other (not like-kind) property for the property you received, and you used the qualified intermediary to avoid the application of the related party rules. See Rev. Rul. 2002-83 for more details. You can find Rev. Rul. 2002-83 on page 927 of Internal Revenue Bulletin 2002-49 at www.irs.gov/pub/irs-irbs/irb02-49.pdf.

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If, after the exchange, you own replacement property that a related party sold into the exchange through an unrelated party such as a qualified intermediary, don't report the transaction on Form 8824 unless one of the exceptions on line 11 applies. Instead, report the disposition of the property given up as if the exchange had been a sale.

If you or the related party (either directly or indirectly) dispose of property received in an exchange before the date that is 2 years after the last transfer which was part of the exchange, the deferred gain or (loss) from line 24 must be reported on your return for the year of disposition (unless an exception on line 11 applies).

If you are filing this form for 1 of the 2 years following the year of the exchange, complete Parts I and II. If both lines 9 and 10 are "No," stop. You don't have to complete Part III.

If either line 9 or line 10 is "Yes," and an exception on line 11 applies, check the applicable box on line 11, attach any required explanation, and stop. If none of the exceptions on line 11 apply, complete Part III. Report the deferred gain or (loss) from line 24 on this year's tax return as if the exchange had been a sale.

Line 11c.

If you believe that you can establish to the satisfaction of the IRS that tax avoidance was not a principal purpose of both the exchange and the disposition, attach an explanation. Generally, tax avoidance won't be seen as a principal purpose in the case of:

  • A disposition of property in a nonrecognition transaction,

  • An exchange in which the related parties derive no tax advantage from the shifting of basis between the exchanged properties, or

  • An exchange of undivided interests in different properties that results in each related party holding either the entire interest in a single property or a larger undivided interest in any of the properties.

 

Lines 12, 13, and 14.

Line 12 should be completed if other property that doesn't qualify as like-kind property was part of the exchange, in addition to the like-kind property. Enter the fair market value (FMV) and the adjusted basis of the other property on lines 12 and 13, respectively. The gain or (loss) from this property is figured on line 14 and must be reported on your return. Report gain or (loss) as if the exchange were a sale.

Line 15.

Include on line 15 the sum of:

  • Any cash paid to you by the other party,

  • The FMV of other (not like-kind) property you received, if any, and

  • Net liabilities assumed by the other party—the excess, if any, of liabilities (including mortgages) assumed by the other party over the total of (a) any liabilities you assumed, (b) cash you paid to the other party, and (c) the FMV of the other (not like-kind) property you gave up.

 

See the example in the instructions for line 18.

Reduce the sum of the above amounts (but not below zero) by any exchange expenses you incurred.

The following rules apply in determining the amount of liability treated as assumed.

  • A recourse liability (or portion thereof) is treated as assumed by the party receiving the property if that party has agreed to and is expected to satisfy the liability (or portion thereof). It doesn't matter whether the party transferring the property has been relieved of the liability.

  • A nonrecourse liability generally is treated as assumed by the party receiving the property subject to the liability. However, if an owner of other assets subject to the same liability agrees with the party receiving the property to, and is expected to, satisfy part or all of the liability, the amount treated as assumed is reduced by the smaller of (a) the amount of the liability that the owner of the other assets has agreed to and is expected to satisfy or (b) the FMV of those other assets.

 

Line 18.

Include on line 18 the sum of:

  • The adjusted basis of the like-kind property you gave up,

  • Exchange expenses, if any (except for expenses used to reduce the amount reported on line 15), and

  • Net amount paid to the other party—the excess, if any, of the total of (a) any liabilities you assumed, (b) cash you paid to the other party, and (c) the FMV of the other (not like-kind) property you gave up over any liabilities assumed by the other party.

 

See Regulations section 1.1031(d)-2 and the following example for figuring amounts to enter on lines 15 and 18.

Example.

A owns an apartment house with an FMV of $220,000, an adjusted basis of $100,000, and subject to a mortgage of $80,000. B owns an apartment house with an FMV of $250,000, an adjusted basis of $175,000, and subject to a mortgage of $150,000.

A transfers his apartment house to B and receives in exchange B's apartment house plus $40,000 cash. A assumes the mortgage on the apartment house received from B, and B assumes the mortgage on the apartment house received from A.

A enters on line 15 only the $40,000 cash received from B. The $80,000 of liabilities assumed by B isn't included because it doesn't exceed the $150,000 of liabilities A assumed. A enters $170,000 on line 18—the $100,000 adjusted basis, plus the $70,000 excess of the liabilities A assumed over the liabilities assumed by B ($150,000 - $80,000).

B enters $30,000 on line 15—the excess of the $150,000 of liabilities assumed by A over the total ($120,000) of the $80,000 of liabilities B assumed and the $40,000 cash B paid. B enters on line 18 only the adjusted basis of $175,000 because the total of the $80,000 of liabilities B assumed and the $40,000 cash B paid doesn't exceed the $150,000 of liabilities assumed by A.

Line 21.

If you disposed of section 1245, 1250, 1252, 1254, or 1255 property (see the instructions for Part III of Form 4797), you may be required to recapture as ordinary income part or all of the realized gain (line 19). Figure the amount to enter on line 21 as follows:

Section 1245 property.

Enter the smaller of:

  1. The total adjustments for deductions (whether for the same or other property) allowed or allowable to you or any other person for depreciation or amortization (up to the amount of gain shown on line 19), or

  2. The gain shown on line 20, if any, plus the FMV of non-section 1245 like-kind property received.

 

Section 1250 property.

Enter the smaller of:

  1. The gain you would have had to report as ordinary income because of additional depreciation if you had sold the property (see the Form 4797 instructions for line 26), or

  2. The larger of:

    1. The gain shown on line 20, if any, or

    2. The excess, if any, of the gain in item (1) above over the FMV of the section 1250 property received.

 

Section 1252, 1254, and 1255 property.

The rules for these types of property are similar to those for section 1245 property. See Regulations sections 1.1252-2(d) and 1.1254-2(d) and Temporary Regulations section 16A.1255-2(c) for details. If the installment method applies to this exchange:

  1. See section 453(f)(6) to determine the installment sale income taxable for this year and report it on Form 6252.

  2. Enter on Form 6252, line 25 or 36, the section 1252, 1254, or 1255 recapture amount you figured on Form 8824, line 21. Don't enter more than the amount shown on Form 6252, line 24 or 35.

  3. Also enter this amount on Form 4797, line 15.

  4. If all the ordinary income isn't recaptured this year, report in future years on Form 6252 the ordinary income up to the taxable installment sale income, until it is all reported.

 

Line 22.

Report a gain from the exchange of property used in a trade or business (and other noncapital assets) on Form 4797, line 5 or line 16. Report a gain from the exchange of capital assets according to the Schedule D instructions for your return. Be sure to use the date of the exchange as the date for reporting the gain. If the installment method applies to this exchange, see section 453(f)(6) to determine the installment sale income taxable for this year and report it on Form 6252.

Line 24.

If line 19 is a loss, enter it on line 24. Otherwise, subtract the amount on line 23 from the amount on line 19 and enter the result. For exchanges with related parties, see the instructions for Line 7, earlier.

Line 25.

The amount on line 25 is your basis in the like-kind property you received in the exchange. Your basis in other property received in the exchange, if any, is its FMV.

Section 1043 Conflict-of-Interest Sales (Part IV)

If you sell property at a gain according to a certificate of divestiture issued by the Office of Government Ethics (OGE) or the Judicial Conference of the United States (or its designee) and purchase replacement property (permitted property), you can elect to defer part or all of the realized gain. You must recognize gain on the sale only to the extent that the amount realized on the sale is more than the cost of replacement property purchased within 60 days after the sale. (You also must recognize any ordinary income recapture.) Permitted property is any obligation of the United States or any diversified investment fund approved by the OGE.

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If the property you sold was stock you acquired by exercising a statutory stock option, you may be treated as meeting the holding periods that apply to such stock, regardless of how long you actually held the stock. This may benefit you if you don't defer your entire gain, because it may allow you to treat the gain as a capital gain instead of ordinary income. For details, see section 421(d) or Pub. 525, Taxable and Nontaxable Income.

Complete Part IV of Form 8824 only if the cost of the replacement property is more than the basis of the divested property and you elect to defer the gain. Otherwise, report the sale on your Schedule D or Form 4797, whichever applies.

Your basis in the replacement property is reduced by the amount of the deferred gain. If you made more than one purchase of replacement property, reduce your basis in the replacement property in the order you acquired it.

Line 30.

Enter the amount you received from the sale of the divested property, minus any selling expenses.

Line 35.

Follow these steps to determine the amount to enter.

  1. Use Part III of Form 4797 as a worksheet to figure ordinary income under the recapture rules.

  2. Enter on Form 8824, line 35, the amount from Form 4797, line 31. Don't attach the Form 4797 used as a worksheet to your return.

  3. Report the amount from line 35 on Form 4797, line 10, column (g). In column (a), write "From Form 8824, line 35." Don't complete columns (b) through (f).

 

Line 36.

If you sold a capital asset, enter any capital gain from line 36 on your Schedule D. If you sold property used in a trade or business (or any other asset for which the gain is treated as ordinary income), report the gain on Form 4797, line 2 or line 10, column (g). In column (a), write "From Form 8824, line 36." Don't complete columns (b) through (f).

Instructions for Form 8824 - Notices

Paperwork Reduction Act Notice.

We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below.

Recordkeeping 10 hr., 16 min.
Learning about
the law or the form
1 hr., 59 min.
Preparing the form 2 hr., 14 min.

 

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.