sale of 1031 exchange acquired property

[briantoth3]

I just sold a rental property that I have owned for 15 years. I purchased it with the help of 1031 exchange proceeds.  Where in Turbotax do I enter the fact that I used the 1031 funds and need to now pay those capital gains?

[MissMCJ]

You will not report that in TurboTax.  You will keep that information with your tax records.  In TurboTax Premier or Home and Business you will report the sale of the rental property and answer the questions in the interview.

[Mike9241]

the depreciation you took on the old property will be part of the depreciation recapture

[MikeinSC]

When you did the exchange, a form 8824 was filed to show the exchange and the basis of the new property.  This amount should have been used in the depreciation calculations (tax cost basis) of the new property.  If you use those schedules to show your cost and accumulated depreciation, you will be reporting the correct basis in the acquired property.  Be sure that you also include any of the basis that may have been classified or allocated to land cost, many times this is not included on a depreciation schedule as it is not depreciable.

[Dionkouki]

Did you ever figure out or verify that turbo tax was using the correct adjusted basis?  I can find the original 1031 exchange I entered in turbo tax using form 8824 from my 2017 return. I don't see where it's using the adjusted basis in the calculation for the sale of the home in 2021. 

[GeorgeDenseff]

You will not get the adjusted basis from TurboTax.  You need to calculate that outside of TurboTax and enter it in the portion where you report the sale of the property.

[Dionkouki]

Thanks for the quick reply.  But it doesn't have a place for adjusted basis. It didn't even ask me for the purchase price. Assuming it knows from when I entered in my 2017 taxes in my form 8824.  All it wanted under sale of property was the asset sale price, asset expenses, land sale price, land expenses.  It did the rest. Considering deleting those pages and starting again

[GeorgeDenseff]

That has been improved then and I was not aware.  Thanks for letting me know.

[Dionkouki]

Sorry looking through it again.  It did ask me to verify the purchase cost it grabbed from my previous return, which is correct. I could override the cost but then it would be in conflict with the true purchase cost.  Need a place to put in adjusted cost basis.  

[DianeW777]

If you believe you made some kind of error when you made the 1031 exchange, or when you prepared your 2017 tax return, then that would require further details. Please provide clarification here. If that is not the case, see the information below.

There is no change in the basis of assets.  The first property carries over as though you never exchanged it.  At the point of sale, you will report the full gain you should because the depreciation just continued on from the first property.  The section 1031 transaction allowed at least some deferral of gain at the time of the exchange, which is the intent. This is the time you will pay tax on the full gain. 

• 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.

[ccthealias]

Where do you report the sales of the property that is sold after a 1031 exchange if you have been rent for part of the year.  I went through the flow for the rental but it's not clear how and where you enter the depreciation recapture.  The flow is actually very confusing

[RobertB4444]

If the depreciation is due to the rental use then TurboTax will add the depreciation to the gain and you don't need to enter it.  If the depreciation is due to the 1031 exchange then you will need to enter it as part of the adjusted basis calculation.  

If you are having trouble entering the sale on your own then you are probably better off having someone walk through the return with you to look at your entries so I recommend getting live expert help.

Here is a link to finding a TurboTax expert.

However, that requires upgrading your product which may be an expense you don't want.  In that case you can call an expert and ask questions over the phone.

Here is a link to the TurboTax Phone Number.

[Dionkouki]

Thanks for the response.  I had live help and everyone I talked to said what I had entered was correct even though I was pretty sure it wasn't.  I was even told I don't have to pay back the depreciation recapture and it was a tax benefit for investing in real estate. I upgraded to having my taxes done for me and they confirmed what you said that you have to put the adjusted basis which is confusing because that page in TurboTax asks for this specific property and from previous questions it seems that it used to have follow up pages to enter in the adjusted basis.