1031 Exchange on Rental Property

[karencnorth]

How do you enter a 1031 exchange in TT?  When I select yes under the rental property we sold, it calculates the tax on the gain.  It does not give me an option to enter a like-kind exchange.  I tried the "jump to 8824" option I read about, but then how do I show the asset was sold under Rental and Royalties asset section?.

[Mike9241]

in the 8824 you must link it to the schedule E worksheet

in the property section enter only the sales date

evidently Turbotax does not create a new property worksheet for the property received in exchange. you are on your own

also Turbotax may not be tracking the depreciation taken on the property given up, That does not go away and is subject to recapture should the property be sold directly or in a nonqualifying exchange.

[MonikaK1 · Accepted solution]

When you exchange rental properties, check the Rentals section to be sure the old property shows as sold and the new property is entered. Also, check to make sure the sale/ exchange is only reported once on your return though you make entries in more than one place.

To enter a like-kind exchange and set up a new rental property, you can follow these steps:

1. You want to type in like kind in the Search and do not hit enter. Instead, click the magnifying glass.
2. Once you click the magnifying glass, then the articles change and you get the jump to link
3. Click on the jump to like kind words
4. It will take you to Any Other Property Sales?
5. Select 1031 Like-Kind Exchange and follow the prompts

Another entry method follows these steps (this works if you don't have the jump-to function or to avoid Search):

1. From the screen Your income and expenses (which you access by selecting Wages & Income from the left margin)
2. Scroll down to Other Business Situations.
3. Click on the Show More drop-down arrow if necessary to reveal the options.
4. Select Start across from Sale of Business Property.
5. On the screens that follow, you should see an option to select like-kind exchanges.
6. Continue to enter your information
7. You should see screens such as Sales of Other Business Property, Total Gross Proceeds, and these screens may not relate to your tax situation.  If they do not, then select No, Continue, or Done as appropriate.
8. On the screen Like-Kind Exchanges is where you can enter the information about your replacement property.  

When you have completed these steps, go to Forms if using Desktop or Preview my 1040 and look for Form 8824, which will populate from your entries in the Like-Kind Exchanges screen. Note the basis for the replacement property.

Next, look for Form 4797. Any ordinary gain (including "boot") or loss resulting from the like-kind exchange will appear on Line 16 of Form 4797. Any total gain or loss on Line 18b of Form 4797 will be transferred to Schedule 1, Part 1, line 4.

If your Form 8824 didn't show any taxable gain for the current year from the exchange, then there wouldn't be any gain to transfer to Form 4797 or Schedule 1. If your entries on Form 8824 showed that the gain qualified to be deferred, that would appear on Line 24 of Form 8824 and will reduce your basis in the new property, which is shown on Line 25 of Form 8824.

Finally, enter the new property as an Asset in the rental section of TurboTax if you haven't already, using the adjusted basis form Form 8824 and splitting out the portion that represents land.

@karencnorth