How do you enter the basis of a rental property acquired in a like-kind exchange? I know what the amount is, I just don't know how/where to enter it.

[Critter-3]

Just enter the asset in the asset section like it was a new purchase.  

[bobboka]

cant be right. i need the whole like kind exchange stuff, form 8824 and all that.  it is not simply a purchase of a new property--besides the basis is not the same as the purchase price--i have to account for previous depreciation, plus the purchase price of the original asset

[Critter-3]

You depreciate property you received in a like kind exchange (Section 1031), as though you never gave up the original property.  You use the same adjusted basis as the property given up. If you paid money in addition to the property given up then you would depreciate the additional cost over the same recovery period.

• Where do you enter a like-kind  or Section 1031 exchange?
• IRS Fact Sheet for Section 1031 Exchange
• IRS Instructions for Form 8824

To be clear, you continue the depreciation as though there was no trade. Then with any extra cash that was paid for the replacement property (the property received in the exchange) you set up a new asset and begin depreciation in 2020 as residential rental property using 27.5 year recovery period (depreciation method).

If you buy up in your exchange (your New Property cost more than you sold your Old for), the answer is easy – you treat the additional cash part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of a capital improvement.

[bobboka]

yes, i agree. but  i have to generate form 8824 to report the exchange--, and that doesn't happen if i just say i bought a new property. 

[DianeW777 · Accepted solution]

Yes, you must file Form 8824.  Use the instructions provided above (and below for your convenience).  Also use the link to see when that form is available.

• Where do you enter a like-kind  or Section 1031 exchange?
• When will federal forms be available? (Form 8824 will be ready on 2/24/2022 likely waiting on the IRS to finalize since it is still in draft form)

When you are signed into your TurboTax Online Account you can follow the steps below:

1. Under Wages and Income scroll to 'Other Business Situations' > Select Show More > Start Sale of Business Property
2. Check the box next to Any additional like-kind exchanges (section 1031) > Continue
3. Follow each screen to make your entries > Your Form 8824 will be completed for you based on your entries
4. See the images below for assistance

[lendy]

• Where do we enter Rents and Depreciating Assets for the new Like-Kind Acquired property?
  1. Create a new Property in (Rental and Royalty Summary) utilizing the Cost Basis calculated in Form 8824?   or 
  2. Enter a new Asset within the Relinquished Property in (Rental and Royalty Summary) using the form 8824 Cost Basis?  (My problem with this option is that the properties are in different states.  I would have to completely change the profile which will mess up my current state taxes.)
• Do we leave the Relinquished Property in (Rental and Royalty Summary) with each Asset having disposition date?

[DianeW777]

It depends. It's understandable the states would matter for the state return(s) accuracy to be simplified since the properties were in different states.  First it's important to know the status of your assets before and after the exchange.

• Current Asset (now belongs to the property received in the exchange): building and land -retains the same exact character, nothing changes including accumulated depreciation.
• New Asset (the buy up): Additional money paid in the exchange and/or improvements
• Land is already in the asset from the original property

You can begin a new rental property with the aforementioned in mind, i.e., enter them with a new name and/or address but with the exact numbers from the property traded. This will allow you to tax property A, to state A and property B to state B.

For the property given up (property A), you can indicate the following:

1. First use the Search (upper right) > Type rentals > Press enter > Click on the Jump to... link
2. Or Wages & Income > Rental Properties and Royalties > Update > Continue to Rental and Royalty Summary > Edit the property
3. Scroll to Assets/Depreciation  > Click Update > Select 'Edit' next to each asset
4. Edit beside each asset > Continue to the Tell Us About This Rental Asset
5. Select the checkbox beside 'This item was sold, retired, .... traded in ....etc. > enter the date it was traded (sold/retired)
6. Answer the question about whether it was 100% business > Leave the original date it was placed in service (may be purchase date or later depending on your circumstances)
7. Continue to the screen 'Confirm Your Prior Depreciation'  
   • The amount displayed is only for prior years and does not include the current year. 
   • Continue until you see the current year amount displayed and make a note to add the two amounts together for the Section 1031 like kind exchange.
   • This completes the asset portion of the trade.
8. Answer 'Yes' to Special Handling
9. Assumed that Form 8824 is already completed
10. Enter the new property as indicated in the bullets above.

Depreciation Rules:

The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, and does not change! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).

@lendy