I had a similar problem - we did a 1031 exchange where all the gain was able to be deferred, but when I entered all the data for sale of the rental house and purchase of the new property (the like-kind exchange), Turbo Tax was not deferring the gain, but was instead generating a Schedule D and Form 4797, including the gain on those forms and then taxing it. (TT also generated a form 8824, but that form was supposed to be there and was correct.) I found some comments online that helped me solve it. Someone suggested that for Turbo Tax purposes I should think of the sale of my relinquished property not as a "sale" but rather as merely an "exchange" of the property. A sale will generate Schedule D and Form 4797. They suggested I go into TT and delete the initial info I had filled in about "sale" of the property, but leave in the info I had provided about the like-kind exchange. Basically, TT was treating the exchange two different ways at once (hence tax when there should not have been any). To fix it, there is a question where you were asked if you disposed of the property in the current year. They said to change the answer to "no" and then delete all sales info I had filled in. Essentially, I deleted all the "sale" data but left in all the "exchange" data (the info you entered later on once you checked the "like-kind" box). This fix caused TT to recompute everything and fixed my problem. In our case, that meant that now I have an 8824 but no Schedule D and no form 4797. This solved the problem for us because in our case we have no recognized gain on the exchange (our new property cost more than our old property sold for) so 100% of our gain is deferred. I hope this helps you. I am not an accountant so I cannot vouch for its accuracy as an expert could, but it balanced to all my own calculations, so I believe it is a sound solution.
