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Hi Lily,

I only found this TT discussion thread after completing our 2021 tax returns, in which we sold 8 relinquished properties, used IPX1031 as the QI, and exchanged for 3 like-kind replacement properties, all declared correctly within 45 days, and completed the exchange within 180 days in 2021.

A shout-out of "thank you" to all Experts, TagTeam, Randy, and many others whose comments, discussion, and advice (dating back to 2020) served to complete the knowledge base of how to work around the limitation of TT (Home and Business for us), in generating the correct Form 8824 for filing.

We employed the following:

1) We grouped the relinquished properties into Idaho Exchange Portfolio (4 properties) and Nevada Exchange Portfolio (4 properties); this was required by IPX1031 as the depository trust laws are different for the 2 states.

2) We developed an EXCEL Spreadsheet for each of the 2 groups, in which we calculated for each relinquished property within the group the adjusted cost basis, realized gain, total deferred realized gain (same as realized if no boot or cash out), recognized gain.  Improvements (renovations before sale of the relinquished properties) were recorded as increase of the original purchase costs (raised adjusted basis calculation, lowered deferred realized gain), and recorded in Sch E as expenses (painting, refacing) and depreciation items (appliances, which IRS allows one time full depreciation).

3) We then summed for all 8 properties the adjusted cost basis and deferred realized gain, into a TOTAL adjusted basis and deferred realized gain for apportioning to the 3 replacement properties calculation.

4) For the 3 replacement properties, we established each, in the EXCEL spreadsheet, as a new property in Sch E, identifying solar panel costs, landscaping, water softeners, vertical blinds (major purchase) as depreciable assets with the correct method of depreciation.

5) For the Purchase Cost of the Replacement Properties in Sch E, we employed Randy's suggestion (circa 2020) of entering the New Cost Basis (add the land cost because TT will subtract the land cost again for the basis to start the depreciation), so TT will start the 27.5 yrs SL depreciation with the correct amount.  This for single depreciation of the New Cost Basis.  For accelerated depreciation of the remaining adjusted cost basis of the relinquished properties, you have to remove that amount from the New Cost Basis.

6) For the accelerated depreciation of the remaining depreciable value of the 8 relinquished properties, we apportioned the total to the 3 replacement properties based on a pro rata basis of their FMV (purchase cost).  However, when we establish this "Remaining Un-depreciated Value of Relinquished Properties" as an asset for depreciation, we have to enter in the original purchase date and purchase price for this asset (as if it is the relinquished properties), so TT will confirm the already depreciated value from the previous years, and continue to depreciate correctly for the remaining years (for us 6.5 yrs for some, and 11.5 yrs for others).

7) We were confused by the methodology of Form 8824 (Lines 15 - Lines 25) versus accountancy publications and TT community advice on how Adjusted Basis, Realized Gain, Deferred Gain and Basis of Like-Kind property were calculated.  We resolved our misunderstanding after the following algebraic proof:

Equation 1:  New Cost Basis Replacement = FMV Replacement - Deferred Gain from Relinquished

Equation 2:  Deferred Gain from Relinquished = FMV Relinquished - Adjusted Basis Relinquished

substitute Eq 2 into Eq 1

Equation 3: New Cost Basis Replacement = (FMV Replacement - FMV Relinquished) + Adjusted Basis Relinquished

If you take the difference in FMV between the Replacement and Relinquished + the Adjusted Basis of the Relinquished, you have the New Cost Basis of the Replacement; it is counter intuitive until you see it algebraically.

😎 For TT to generate Form 8824 correctly,

- we entered SUMMARY on Line 1 and Line 2;

- the date the first relinquished property was acquired (Line 3);

- the date the first relinquished property was sold (Line 4);

- the date we identified the replacements (Line 5; TT will check if this date is within 45 days of Line 4); and

- the date we closed on purchasing the first replacement property (Line 6; TT will check if this date is within 180 days of Line 4)

- for Line 15 - Line 25, we entered values based on our EXCEL Spreadsheet TOTAL calculations, and the rest of FORM 8824 / work sheet calculated without errors.

We submitted a simplified version of our EXCEL Spreadsheets with comments and explanations as our supported documents to Form 8824; and yes, we cannot eFILE with supporting docs, so we had to mail our tax return.

There was good advice from a colleague on this forum regarding inputting in TT what date the relinquished properties were removed from rental service and how to deal with Sch E questions about the "sale" of the relinquished properties when there was no sale.  By happenchance we implemented this before reading the colleague's good advice, so we will see whether TT 2022 will automatically remove all 8 relinquished properties from our tax return.

We will make available the EXCEL Spreadsheet to colleagues (future and present) who may benefit from using it to check their calculations for complex 1031 like-kind exchanges.  Leave your email in a future comment / response.

DISCLAIMER - we are NEITHER TurboTax professionals NOR Tax Experts, NEITHER CPA NOR Tax Accountants.  The reader is advised to consult their CPA and Tax Accountants on how to complete any IRS forms correctly. 

We did not want to lose the repository function of TT for the last 22 years by turning the 2021 tax return to a CPA/Tax Accountant; so we struggled with it like all the colleagues sharing on this forum.  Again, thank you all for your insights.

With kind regards,

WCT888