"Liabilities at Closing" for a building we sold and then did a 1031 Exchange with

[Think57]

We had an interest in an Apartment Building DST which we treated as an independent piece of real estate investment property that we filed a Schedule E for every year.   The sponsor sold the building on 7/20/2023.  In early 2024, we received from the sponsor the annual tax document for 2023.  The tax document listed our share of the amount of "Liabilities at Closing"  as $125,587.    

Also in 2023, within a week after the sponsor sold the building, we did a 1031 exchange into another DST apartment building investment opportunity.

In completing the Schedule E for this investment, and the Form 8824 for the 1031 Exchange, I did not see any place/entry field to use this "Liabilities at Closing" number.  I am assuming that this is a balance sheet number.  It is not to be used for depreciation or amortization, or to be listed as an expense.  Should I be using this number somewhere in the Schedule E or 8824, or is just given to us for our information?

Thank you in advance for your assistance.

[Rick19744]

There are too many details unknown at this point, and a forum such as this is not conducive to collect the necessary information and then provide a response.

You should have a discussion with the DST handling the transaction.

Unless a qualified intermediary was used for the transaction, there is a good chance you may not qualify for the like-kind deferral.

[Think57]

Thanks Rick for your response.  We have done more than a few 1031 Exchanges and use a registered representative for our DST purchases, who helps guide us.  And always use a Qualified Intermediary.  So we have no worries about our exchange qualifying for the deferred capital gains tax treatment.

This was just the first time that I have paid attention to the liabilities on the balance sheet at the closing, only because the DST sponsor for the relinquished property did not provide a balance sheet but did provide just that one number, our portion of the liabilities at closing.

Thanks again,  Think57

[Rick19744]

While limited facts, I am fairly certain there is no tax impact on the liabilities figure provided to you.

[Think57]

Thanks Rick !

[Think57]

Hi Rick.  Think I figured it out.  While the "Liabilities at Closing" number is not used in the Schedule E, it is used in the 8824 Tax Form for the Like-Kind Exchange.  This number is usually the loan outstanding of the relinquished property and Turbo Tax prompts for the "Value of mortgages/loans transferred or paid off as part of sale" in the step by step process for a Like-Kind Exchange.

Thanks again, Think57

[Rick19744]

You have mentioned you have done this in the past, so I assume you are comfortable completing the Form 8824.  You only mentioned liabilities, but there are other components that I hope were provided to you as well for completing the 8824?

While there are no current tax implications, this does impact the deferral and ultimate tax liability.

[Think57]

Hi Rick.  Yes, we were given all the information needed to complete the 8824.  This is our sixth 1031 Like-Kind Exchange.  The new twist this year for Form 8824 is the request for the basis of Like-Kind Section 1250 property and 1245 property received.

[Rick19744]

Yep.  That is exactly why I asked the question.

Appears you are on top of this.