How do I report sale of property that was originally a 1031 exchange

[boofer46]

did exchange in 2000, selling in 2016, not a new exchange

[TomYoung · Accepted solution]

If you don't have a good handle on this situation I'd advise getting some local competent help.  But, essentially, your basis for the original property you gave up in 2000 carries over into the new property and your gain represents the difference between that basis and the proceeds of the sale.  A 1031 exchange only defers the realization of the gain.

Tom Young

[lucanadeau]

So, in Turbo Tax, where do we report the basis (or gain) from the original property? I checked the box that said the sale was of a property acquired in a like-kind exchange, but there were no follow-up questions to include the basis from the original property - presumably this would populate Form 4797, Line 5? Does this also require filling out a new form 8824, even though this sale is not another 1031 exchange?

[pinkneedle]

same question here.  your answer, with due respect, did not answer the question.  you explained gain and basis but not how to report via turbotax.  
tom, i suspect you will have to do this on your own via the irs instructions and straight forms in turbotax.  this is where i am headed now.  
check out pub 544, sale and disposition of assets to start.  scooter

[pinkneedle]

same question here.  your answer, with due respect, did not answer the question.  you explained gain and basis but not how to report via turbotax.  
tom, i suspect you will have to do this on your own via the irs instructions and straight forms in turbotax.  this is where i am headed now.  
check out pub 544

[dd76109]

What about the depreciation from that original property?  Does the  basis of that original property take the depreciation on it into account?  Is there a pub you can refer me to which will answer these questions?

[HUFNEJRKBA]

I also have the same question.

[HUFNEJRKBA]

Please give us an aswer on how to do it in turbo tax

[DaveF1006]

If your property was originally a 1031 exchange please review this IRS link for further details.  When you report this sale of this property, you must use the basis of the property given up minus adjustments. The adjustments include the deferred gain, and any additional gain realized since the purchase of the replacement property, This is something that you need to keep track of.

Otherwise, since this doesn't involve an additional like-kind exchange, you will not report in your Turbo Tax that this was originally a 1031 exchange.  Just be sure to include in your basis the original cost of your original instead of home minus the amount of the deferred gain. This may result in more of a taxable gain this year but as the old adage goes, pay me know or pay me later.

To properly report this as Sale of Business property and if you are in Turbo Tax Online, you will need to report this as sale of business property.  

1. Go to federal>wages and income>see all income>other business situations>Sale of Business Property>start
2. Next screen you will say none of the above You will see an entry there for like-kind exchanges but you will not select that because this current transaction is not a like kind-exchange.
3. Then it will ask you questions about this transactions. Just follow the prompts

If you are using Turbo Tax software the menu path is similar except where it says other business situations in the online version, Sales of Business Property will be listed under Business items in the software version.

[Dionkouki]

Thank you for the clear instructions. When I follow them I click on "none of the above" and hit continue it just takes me back to the "your income" summary page without any further questions. Is that a bug in TurboTax online 2022

[JulieS]

No, this is not a "bug". The instruction above is two years old and was developed as part of a long thread with other details. The program has evolved over time and your situation may be different from that of the original poster. 

Exactly how you should report the sale of a business property that was acquired in a 1031 exchange, but is not in a current 1031 exchange depends on whether that property is listed as a rental on your tax return.

If the property sold is listed in a rental schedule on your tax return, you indicate in that section that you sold the property. The questions about the disposition come up toward the end of the rental section. 

If this is not a current rental:

1. Go to Federal.
2. Select Wages and Income.
3. Select See all income.
4. Select Other business situations.
5. Select Sale of Business Property
6. Click Start to the right.
7. On this page, you have to select the best option that matches your situation. Most likely it will be the first option, Sales of business or rental property that you haven't already entered. 
8. Use the next screen to report the details of your sale.

[Dionkouki]

Thank you for the detailed response. It is a rental and I also have it listed as a sold asset under the rental section.  Ive gone through it several times and the only place it asks for prior info is the first page where it asks me to verify the info transferred from last year's return. It displays the purchase date, purchase price, land value,prior depreciation. It all looks correct for this property. Am I supposed to modify the prior depreciation to include this property and the previous property.  Even if I did it would only take into account the depreciation recapture and not the capital gains. I would have to change the cost to the adjusted cost calculated using both properties. Is that what I'm supposed to do?

[Dionkouki]

Within the rental section where it lists the info for the house I could add another asset below it and add all the info from my previous property. Is that how it's supposed to be entered?  

[DianeW777]

Since your rental property is on your tax return the process stays in the rental section.  Do not add an additional sale under Sale of Business Property. This would only duplicate the sale.

Do not alter or modify prior depreciation. This would have carried on from the first property before the section 1031 exchange as it should have. There should be nothing to alter.  The section 1031 transaction allowed at least some deferral of gain which is the intent. And as our awesome tax expert explained it's 'pay me now or pay me later'.  This is the time you will pay tax on the gain.

Do not enter another asset - the rental property you have in your return is the old property which is exactly the same as the property you received in the 1031 exchange.  There is nothing to change here.

You need to dispose of the property by telling TurboTax how and when it was disposed of.  Follow the instructions below.

1. Click on Income & Expenses (or Business Income and Expense)
2. Under Your income and expenses, scroll down to
3. Rental properties and royalties, click Edit/Add
4. Do you want to review your rental?, click Yes
5. Under Rent and Royalty Summary, click Edit
6. Click Update to the right of Assets/Depreciation.
7. Do you want to go directly to your asset summary?, click Yes and Continue
8. Click Edit to the right of each asset to be disposed
9. Go through several screens until you get to Tell Us More About This Rental Asset
10. Click on This item was sold…….   Enter your dates
11. Answer No to Special Handling Required And continue to answer the questions
12. Answer No to main home then continue to enter your sales price, sales expenses
13. See images below.

You might also review information here.  Please update if you need further assistance.

[Dionkouki]

Thank your for the step by step and images.  I did all that and all the info still pertains only to this house.  I can't find it using or asking any info from the previous asset before the 1031 exchange.  I spoke to someone through live help and they said since the federal review went through with no errors it should be good.