I entered a sale of rental property and then a like-kind exchange, but all the gain is hitting Capital Gains and cannot remove it or eidt it

alshababi — Mon, 26 Feb 2024 02:30:29 GMT

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

DianeW777 — Mon, 26 Feb 2024 14:19:21 GMT

There will be taxable gain in two scenarios.

Not all of the proceeds are invested into the property received; or
The trade is not handled in the appropriate time frame. In this scenario all gain is taxable.
1. The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties.
2. The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.

If you did meet the requirements here are some details and steps that may assist with your entry.

Depreciation Rules:

The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, and does not change! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).

If you "bought-up" in your exchange (your New Property cost more than you sold your Old Property), the answer is easy – you treat the buy up part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of construction, for example, of a garage added to an existing house – the cost is the amount of the buy-up; the date you start depreciating it is the date you purchased the new property; and the depreciation method you use is the method most appropriate for that type of property in the year you bought the New Property (regardless of the method you used for the original house). If you think of it this way, then it's easy, even if your property is a large office building or a more complex purchase.

When you have your TurboTax return open you can use the following steps to update the original assets for the exchange.

First use the Search (upper right) > Type rentals > Press enter > Click on the Jump to... link
Or Wages & Income > Rental Properties and Royalties > Update > Continue to Rental and Royalty Summary > Edit the property
Scroll to Assets/Depreciation > Click Update > Select 'Edit' next to each asset
Edit beside each asset > Continue to the Tell Us About This Rental Asset
Select the checkbox beside 'This item was sold, retired, .... traded in ....etc. > enter the date it was traded (sold/retired)
1. You can choose not to select this and just change the name of the assets given up in the trade to identify them with the new property. The depreciation for the year will not change on these assets.
Answer the question about whether it was 100% business > Leave the original date it was placed in service (may be purchase date or later depending on your circumstances)
Continue to the screen 'Confirm Your Prior Depreciation'
- The amount displayed is only for prior years and does not include the current year.
- Continue until you see the current year amount displayed and make a note to add the two amounts together for the Section 1031 like kind exchange.
- This completes the asset portion of the trade.
Answer 'Yes' to Special Handling.

Next you will complete the like kind exchange, Form 8824 (Section 1031 exchange):

Use the Search (upper right) > Type like kind > Press enter > Click on the Jump to... link
Select the checkbox beside 'Any additional like-kind exchanges (section 1031)' > Continue
Complete the information for the 'Real estate given up' and 'Like-Kind Property Given Up' > Continue
Name the event > Continue > Complete the information for the 'Like-kind property received'
If you did not give unlike property in the exchange click 'No' and continue past these screens, if 'Yes' answer the questions.
Enter any exchange expenses (sales expenses) > Continue to see your deferred gain.

If you marked the original assets as sold, traded, etc (see 6. above) then go back to your rental activity and then enter new assets with the exact same information as the property given up with a new name, but with the same date placed in service as the old property, for all assets that are part of the exchange.

Enter a new asset for any buy up/added cash in the exchange including the purchase/selling expenses you paid in the trade. The new asset will begin depreciation on the completion date of the trade/like kind exchange.

@alshababi

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

alshababi — Thu, 29 Feb 2024 01:52:15 GMT

Thank you I have done all these steps, but still showing a gain to be recognized for the exchange which is much bigger than the cash I received. As if all the gain is yet to be deferred and it won’t let me delete anything and start over, which is very frustrating.

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

CatinaT1 — Wed, 06 Mar 2024 19:02:07 GMT

Are you still experiencing this problem?

Make sure you have ran all updates.

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Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

RTF1 — Sat, 20 Apr 2024 07:08:22 GMT

I have the same exact issue. Also cleared my cache and cookies but no changes.

Any way around this problem?

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

CatinaT1 — Mon, 22 Apr 2024 18:57:38 GMT

Please call TurboTax Customer service.  Here is a link:  Turbo Tax Customer Service

topic I entered a sale of rental property and then a like-kind exchange, but all the gain is hitting Capital Gains and cannot remove it or eidt it in State tax filing

I entered a sale of rental property and then a like-kind exchange, but all the gain is hitting Capital Gains and cannot remove it or eidt it

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...

Re: I entered a sale of rental property and then a like-kind exchange, but all the gain is hittin...