I have a congruent situation. This question is a follow-on for more detail and clarification.
We have completed a 1031 exchange of one Schedule C vacation rental property for another using Reality Exchange, Inc as the intermediary. My issue is how to document the exchange for tax year 2022. I am using TurboTax Home and Business.
The personal property is not significant, inconsequential. It was transferred for $1 under a separate contract. There were many repairs and "improvements" made in 2022 that fall under the de minimis safe harbor rules -- no problem documenting and entering those in TTH&B. There are several assets not fully depreciated and subject to Section 179 recapture, again, not a problem with documentation and TTH&B. However, four larger improvements were made in 2022 (carpet replacement, LVP flooring, a new water heater and replacement of the refrigerator that failed after the property came under contract) that must be included. I believe that since all of these items have been installed in the house, they are intrinsically part of the like-kind exchange and can be grouped together.
I read one thread that suggested entering the items as separate assets, then allocating the sales price across the house plus the four other entries. This option reduces the exchange basis and doesn't reflect the actual transaction. Another suggestion was to make the four separate asset entries but assign a $1 sales price to each which also doesn't reflect the actual transaction and results in four large short-term losses and tax consequences I not yet fully comprehended. It almost certainly would include an invitation to an audit.
I believe this thread suggests the correct approach, but, unless I'm missing something, it appears that TTH&B doesn't provide support to implement it automatically by grouping the like-kind assets for the exchange, i.e., the Form 8824 must be completed manually which most likely requires filing on paper.
Can anyone shed some more light on this process and how best to execute it? Specifically, how to best document the four improvements and group them together on Form 8824, either within TTH&B or otherwise.
Appreciate your help.
