IRS Form 4797 lines 21 and 22 Part III -selling a 1031 aquired rental

Juniper40 · ‎April 11, 2020

I see 2 ways to fill out these lines and am really confused by all the IRS Pubs, and directions.

I feel-- (1) Line 21 could be completed by using "cost" and disregarding the "other basis" option shown for that line, in which case one would disregard the adjusted basis reported on the 8824 form when property was acquired, and list ALL depreciation allowed on both the relinquished property plus taken since the exchange on line 22.

OR --(2) Use the adjusted basis from the 8824 on line 21 and disregard the "cost" option and on line 22 include only depreciation taken since the exchange.

Any specific guidance in Turbo Tax or IRS Pubs?

ThomasM125 · ‎April 13, 2020

You would need to use option 2. When you have a like kind exchange, there is typically an unrecognized gain or loss on the exchange. That gain or loss needs to be recognized when you dispose of the property. The only way to do that would be to use the adjusted basis of the property when you calculate the sale. Otherwise, you would not be taking into consideration the gain or loss on the exchange.

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Juniper40 · ‎April 14, 2020

Your answer provides a logical solution, but I believe it would be nice if Turbo Tax would expand the discussion of how these 2 blocks are filled out to account for "prior"depreciation (as accounted for by the 8824 basis) as part of a 1031 exchange. The IRS documents sure do not!

IRS Form 4797 lines 21 and 22 Part III -selling a 1031 aquired rental

Investors & landlords

Investors & landlords