Randy,
Your instructions are very helpful. I am working on my 2021 tax return involving 8824 and having a couple questions. Would you or any other experts please give me some advice. I really appreciate your time and help.
My situation:
- Had a couple of 1031 exchanges in 2021 via IPX as the QI.
- An exchange included three relinquished properties and three replacement properties all closed in 2021, compliant with the 45 day, 180 day, and other 1031 rules. IPX distributed a lump sum funds from the sales of three relinquished properties, subtracted IPX fees, then distributed the remaining funds to the settlement companies for the replacement properties. We used a subset of the fund to cash-purchase a replacement property, remaining funds were divided to close the other two replacement properties.
- Another exchange involved one relinquished property closed in November 2021, and a replacement property in January 2022. The exchange was compliant with the 45 day and 180 day rules.
Questions:
- Is it correct that we'll file a 8824 for each pair of the relinquished property and replacement property?
- In the situation where the replacement property was closed in Jan 2022, is it correct to file 8824 with 2021 and the replacement property itself will appear in 2022 tax return.
Additional questions for each 8824:
3. Adjusted basis of like-kin property given up: Should I include the "to-be-depreciated amount for 2021, the year the relinquished property was exchanged out " for the relinquished property when calculating the Adjusted basis of like-kin property given up (original cost basis / purchase price - depreciation taken).
4. Fair Market Value of Property given up and Exchange Expenses:
* The HUD for the relinquished property sale shows a "Sale Price of Property" and a "Net proceeds to IPX1031" which is smaller than the Sale Price of Property (subtracted costs etc).
* IPX (QI) charges a fee and they subtract that from the Net proceeds to IPX1031. IPX then distributes the remaining funds toward purchasing the settlement property.
>> Should I use the Net proceeds to IPX1031 as the Fair Market Value of Property given up, with the Exchange Expense would just be the IPX fee? or
>> Should I use the "Sale Price of Property" as the Fair Market Value of Property given up, with the Exchange Expense = sum of the below qualifying expenses:
* Real estate broker’s commissions, finder or referral fees
* Owner’s title insurance premiums
* Closing agent fees (title, escrow or attorney closing fees)
* Attorney or tax advisor fees related to the sale or the purchase of the property
* Recording and filing fees, documentary or transfer tax fees
* IPX Fees
3. Exchange Expenses:
Would this include the qualifying expenses for selling the relinquished property only plus the QI fee? or this also include the qualifying expenses for purchasing the replacement property?
Thank you again for your time and expert assistance.
Lily
