I sold a home that hand been used as a rental for 5 years. It was purchased as a family home for 300,00, but it was not a good time to sell it when we purchased our new home. I sold the house for 415,000 (adjusted cost basis 325,087) and paid off a 142,000 mortgage. I purchased 10 acres of bare land with a 1031 exchange, for 85,000. I can not figure out HOW to enter this in Turbo tax. It asks me if I received any non-like kind property and I click "no" but then it tells me it should add up to 187,000 somehow. And whatever I enter makes turbo tax say my tax is more than I got for the property! Yikes!! I should only have a profit of 4 or 5 thousand dollars!!
Please help! I had to file an extension as the 1031 exchange closed after April but want to finish my taxes ASAP so I can minimize my penalty.
You have about a $90k gain. In order to defer gain on the rental home you gave up you needed to buy a new property worth at least $415k and you only spent $85k. Now you have $0 deferred gain and have to pay CG tax on the $90k gain.
Thank you for your answer! Sorry for the delay in replying...I was working out of town. Do you know where I can find out how to fill out the IRS form 8824 for like kind exchanges? The questions Turbo Tax ask are so confusing I thought I would just go to the Forms section and fill it out that way. Unfortunately, I have not be able to figure out exactly what the calculations are asking for on lines 5 and Line 18 of that form . I usually do my family's taxes but may have bitten off more than I can handle this year. I've tried to get professional tax help but nobody in my area is accepting new clients!
Thank you for any advice you can give me!!
The questions Turbo Tax ask are so confusing I thought I would just go to the Forms section and fill it out that way. Unfortunately, I have not be able to figure out exactly what the calculations are asking for on lines 5 and Line 18 of that form .
I am not sure where you are experiencing issues, but your actual exchange should not be that difficult to enter into TurboTax.
First of all, Line 5 is the date you identified the property you received (the parcel of land) and only you would know that date.
Line 18 is the adjusted basis of the property you relinquished (which should be the $325,087 you noted in your original post).
You did not mention exchange fees but you almost certainly would have incurred at least some fees for the 1031 exchange.
Beyond that, the fair market value of the property you relinquished appears to be $415,000 while the fair market value of the replacement property appears to be $85,000. Those figures, as well as the adjusted basis of the relinquished property are critical.
Finally, you did not mention accumulated depreciation, but you need to adjust your basis for that figure.