How do I report sale of property that was originally a 1031 exchange

Forum|Forum|7 years ago
June 7, 2019
4 replies
14 views

did exchange in 2000, selling in 2016, not a new exchange

TurboTax Premier Online

Best answer by TomYoung

If you don't have a good handle on this situation I'd advise getting some local competent help. But, essentially, your basis for the original property you gave up in 2000 carries over into the new property and your gain represents the difference between that basis and the proceeds of the sale. A 1031 exchange only defers the realization of the gain.

Tom Young

TomYoung

Answer

Alumni - Champ

Tom Young

lucanadeau

Level 2

So, in Turbo Tax, where do we report the basis (or gain) from the original property? I checked the box that said the sale was of a property acquired in a like-kind exchange, but there were no follow-up questions to include the basis from the original property - presumably this would populate Form 4797, Line 5? Does this also require filling out a new form 8824, even though this sale is not another 1031 exchange?

HUFNEJRKBA

Level 2

Please give us an aswer on how to do it in turbo tax

DaveF1006

Level 15

If your property was originally a 1031 exchange please review this IRS link for further details. When you report this sale of this property, you must use the basis of the property given up minus adjustments. The adjustments include the deferred gain, and any additional gain realized since the purchase of the replacement property, This is something that you need to keep track of.

Otherwise, since this doesn't involve an additional like-kind exchange, you will not report in your Turbo Tax that this was originally a 1031 exchange. Just be sure to include in your basis the original cost of your original instead of home minus the amount of the deferred gain. This may result in more of a taxable gain this year but as the old adage goes, pay me know or pay me later.

To properly report this as Sale of Business property and if you are in Turbo Tax Online, you will need to report this as sale of business property.

Go to federal>wages and income>see all income>other business situations>Sale of Business Property>start
Next screen you will say none of the above You will see an entry there for like-kind exchanges but you will not select that because this current transaction is not a like kind-exchange.
Then it will ask you questions about this transactions. Just follow the prompts

If you are using Turbo Tax software the menu path is similar except where it says other business situations in the online version, Sales of Business Property will be listed under Business items in the software version.

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Dionkouki

Level 2

Thank you for the clear instructions. When I follow them I click on "none of the above" and hit continue it just takes me back to the "your income" summary page without any further questions. Is that a bug in TurboTax online 2022

JulieS

Level 15

No, this is not a "bug". The instruction above is two years old and was developed as part of a long thread with other details. The program has evolved over time and your situation may be different from that of the original poster.

Exactly how you should report the sale of a business property that was acquired in a 1031 exchange, but is not in a current 1031 exchange depends on whether that property is listed as a rental on your tax return.

If the property sold is listed in a rental schedule on your tax return, you indicate in that section that you sold the property. The questions about the disposition come up toward the end of the rental section.

If this is not a current rental:

Go to Federal.
Select Wages and Income.
Select See all income.
Select Other business situations.
Select Sale of Business Property
Click Start to the right.
On this page, you have to select the best option that matches your situation. Most likely it will be the first option, Sales of business or rental property that you haven't already entered.
Use the next screen to report the details of your sale.

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Dionkouki

Level 2

Thank you for the detailed response. It is a rental and I also have it listed as a sold asset under the rental section. Ive gone through it several times and the only place it asks for prior info is the first page where it asks me to verify the info transferred from last year's return. It displays the purchase date, purchase price, land value,prior depreciation. It all looks correct for this property. Am I supposed to modify the prior depreciation to include this property and the previous property. Even if I did it would only take into account the depreciation recapture and not the capital gains. I would have to change the cost to the adjusted cost calculated using both properties. Is that what I'm supposed to do?