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singhsp
Returning Member

Rental Property sale with proceeds going to two parties for 1031 exchange

My brother and i purchased a condo 10 years back. The mortgage loan was in his name and my name was added to deed a few years back. He has been claiming income and depreciation all the years.

We sold it last year and got the proceeds 50% each and purchased new properties separately using 1031 exchange. The purchase price of the condo was around 115K and we sold it now for around 200K. we got around 70K each from the proceeds.

While doing 2019 taxes, how shall we enter the cost basis and gains in our returns?

1 Best answer

Accepted Solutions
tagteam
Level 15

Rental Property sale with proceeds going to two parties for 1031 exchange


@singhsp wrote:

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?


In a typical 1031 exchange, the transaction is reported on Form 8824.

 

In TurboTax, the transaction can be reported as Sale of Business Property in the Less Common Business Situations section (see screenshot).

 

1031.png

 

Note that the proceeds from the sale of the relinquished property cannot be "disbursed" to you; the proceeds must be held in escrow by the intermediary and then disbursed to the party who owns the replacement property. 

View solution in original post

3 Replies
tagteam
Level 15

Rental Property sale with proceeds going to two parties for 1031 exchange

This is unclear: Did you use a §1031 qualified intermediary? 

 

You cannot sell a rental property, take possession of the funds (actual or constructive) and then buy another rental property with the proceeds. 

singhsp
Returning Member

Rental Property sale with proceeds going to two parties for 1031 exchange

Yes we did use qualified intermediary. Here is the complete scenario, sorry about the incomplete message earlier. 

 

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?

tagteam
Level 15

Rental Property sale with proceeds going to two parties for 1031 exchange


@singhsp wrote:

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?


In a typical 1031 exchange, the transaction is reported on Form 8824.

 

In TurboTax, the transaction can be reported as Sale of Business Property in the Less Common Business Situations section (see screenshot).

 

1031.png

 

Note that the proceeds from the sale of the relinquished property cannot be "disbursed" to you; the proceeds must be held in escrow by the intermediary and then disbursed to the party who owns the replacement property. 

View solution in original post

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