I think I did things properly on Turbotax Premier for Windows 11 on my laptop but the result is freaking me out. Instead of roughly a $10,000 refund I should be receiving assuming the capital gains tax on a 1031 exchange is properly accounted for, the program is instead showing I owe the full capital gains tax (about $85,000) on the sale of an investment rental property even though I did a 1031 exchange to purchase a subsequent investment rental property within the proper time frame and within the rules. Quite clearly there must be something I'm doing incorrectly in the program.
Here are the details:
Property I gave up was purchased Apr 2021 for $469,000 (this has been the depreciation basis since then - no improvements since purchase). Has been fully used as a rental property since then. Sold it in Aug 2024 for $979,000. Net proceeds were $927,000 after commissions, fees, conveyance taxes, etc. Like Kind property was identified in Jul 2024 and purchase closed in Sep 2024. Purchase price was $975,000 but I ended up paying $983,400 with all fees, taxes, etc.
I noticed in filling out information for Form 8824 on Turbotax it asks for "Fair Market Value" for each property. What am I supposed to input there ? The actual sale and purchase prices -or- the amounts adjusted by fees, commissions, etc. ??? It also asks for costs associated with sale of the 1st property but does not ask for costs related to the purchase of the like kind replacement property. Seems strange.
Both properties were managed by the same company and as a result I received only ONE 1099-MISC covering rents for both properties together. In the Wages and Income / Rental Properties section I listed both properties with the proper in service and out of service dates. I also split the rents and operational expenses pro rata between each property. For the old property I also input the relevant data Turbotax is asking regrading it being sold and that's when all of a sudden my tax liability went from $10,000 refund to almost $75,000 owed to the IRS. It was after doing these inputs that I followed your instructions to search "like kind" which led me to inputs for a 1031 exchange. However, the $75,000 is still showing after inputting all of the information needed for form 8824. Clearly, either I'm doing something wring process wise or the software has a flaw. Please help !!! Thanks.
