The interview guidance is confusing and incomplete. For an exchanged property, the form 8824 interview and form does not link back to the schedule E and correct ( partial year) depreciation, and does not calculate or link basis for the exchange as reported on the form 8824
If you have entered assets in previous years to track depreciation, you must manually calculate the current partial year depreciation and override the amount in the Schedule E. Do not enter sales dates for the assets; if you do the program will create corresponding form 4797, and report related gains and losses AS IF NO 1031 Exchange occurred.
Then report the 1031 exchange under sale of business property. Be certain to check the box 'any additional like kind exchanges" and the program will prompt data entry for the 8824 form. You will need to manually calculate the basis for the exchange, likely this will include partial year depreciation from manually adjusted Form 4592 Depreciation and Amortization reports, and data entered for the property on schedule E. There might be a gain or loss from the exchange, depending on the specific details of your exchange.
If you open forms mode, the 8824 form has a link to a specific Schedule E property. I have never figured out what this does, but it does not cause the assets for the property to correctly report partial year depreciation, and link the resulting basis to the 8824.
Multiple calls to support has not resolved this. I find the interview incomplete and it tried to lead me to significant errors. The link on the form 8824 appears broken, but again, I've failed to resolve this with Turbo Tax Support.
This is a complex tax issue, Turbo Tax does not handle it automatically and the interview does not warn you properly to calculate and override certain entries, so if you're not comfortable with it I suggest you'll need to find and pay for some expert help beyond Turbo Tax...
Further more, for the property received in exchange, once you have properly completed the 8824 form, you will have the basis for the new property. This is most likely not the purchase price. You need to go back to the schedule E and enter this new property, using this basis for future depreciation.
