1031 exchange question

[singhsp]

Property Owner: A
purchased: 5/27/2010, 
Purchase price around: $115K 

B agreed to contribute 50% of the downpayment and all expenses

7/28/2014: B(relative)  added to the deed 

A continued to collect rent, pay mortgage and claim depreciation on the property as well show income on their tax returns. 

All expenses were shared by A and B. 

Total improvements done to the property: $15K

Property Sold on 7/28/2019 for Sales Price: 201K 
Closing Costs Paid by the seller: 8707.50 + 6030 + 160.01 + 35
A's Mortgage Balance paid at closing: 44,473.75

Net Disbursed to A 1031 exchange: 70,842.05
Net Disbursed to B 1031 exchange: 70,842.05

Both identified and bought separate properties within the timelines stipulated by the guidelines and the intermediary. 

How will they report this on their tax returns?

Specifically, How will A and B enter values for these questions? 

What is the amounts for "Adjusted basis" of property you gave up? 

AMT Adjusted basis of the property you gave up? 

Fair Market Value of the property you  gave up? 

Value of mortgages/loans transferred or paid off as part of sale?  

[Anonymous_ · Accepted solution]

You have posted this transaction previously.

Are you using TurboTax and, if so, are you in the proper section of the program (like kind exchanges)? 

You could definitely benefit from professional tax guidance and, most likely, professional income tax return preparation. For a 1031 exchange, you want to ensure that your figures align properly, both for the transaction itself and the basis for depreciation of the replacement property going forward.

You posted all of the relevant figures except a couple of crucial figures; the unrecaptured Section 1250 gain (the total amount of depreciation taken on the relinquished property) and the fair market value of the replacement property. Those values need to be entered into the program (as does information for the replacement property for depreciation purposes).

Note that you will not enter the value of any loans unless they were transferred (or paid off) as a part of the transaction (e.g., you assumed a loan on the replacement property or a loan on the relinquished property was assumed).

[Anonymous]

several other issues.   was there from the IRS standpoint a partnership.  can't say but if so did you file returns.  there would be severe penalties if the IRS concluded there was a failure to file.    there is also a legal issue since B was not put on the title until 2014. did he become an equitable owner when the property was purchased?  then there is other missing information the proceeds invested in the exchanged property and any mortgage taken out.  there is another question $201K less about $45K for the mortgage leaves about $156K ($78k each) yet you say the net was only about $142 ($71K each).  I'm guessing that at least some of the difference was due to expenses such as real estate taxes that would be deductible on schedule E.  This leaves open how much additional cash you have to put in the property to be entitled to full deferral.   you really need a pro to look at everything to determine proper reporting.  we certainly can not answer the legal question as to whether there was equitable ownership.   this could substantially affect proper reporting