My Federal Tax due is showing -$197,858 which is an error because a property was not sold but exchanged (1031). I tried to erase Form 4797 unsuccessfully.

[sumitsircar-yaho]

I get a message saying Form 4797 successfully deleted, but it still shows up with not changed in the Federal Tax due.  I then erased Form 8824 and still had no effect on the tax due.

[JohnW152]

You'll need to go in and correct the information you previously entered.

To edit your Section 1031 information TurboTax Online:

1. If you don’t see 2022 TAXES in the left pane, select the dropdown to the right of Income & Expenses on the Hi, let’s keep working on your taxes! page and then select Let’s get started, Pick up where you left off, or Review/Edit. 
   • Otherwise, in the left pane, select Federal, then Wages & Income (This is labelled Income & Expenses in TurboTax Self-Employed)
2. Scroll down and select the Show more dropdown to the right of Other Business Situations
3. Select  Revisit to the right of Sale of Business Property
4. On the  Any Other Property Sales? screen, you most likely have the Any additional like-kind exchanges (section 1031) box checked
   • Unchecking the box won't change what you've input.       Leave the box checked and select Continue
5. On the  Like-Kind Exchanges screen, select Edit to the right of your exchange item
6. From here, you can correct any information previously entered.

[sumitsircar-yaho]

Hi John,

I followed your instructions till I selected Edit to the right of my exchanged property.  The form was blank, so I entered the property data from scratch.  Still couldn't get rid of that pesky -$197,858 for the Federal Tax due!

Moreover, it asks for details about the acquired property, but I exchanged the relinquished property for two properties and there's no provision for more than one.  Thanks for your help.

[sumitsircar-yaho]

On the like kind property received page I left the address blank because there are two properties, but did add the market value of both properties and entered this in the box provided for like-kind property received.  Even so, the Federal tax due is still showing -$197,858, completely disregarding my 1031 exchange!

Your help is greatly appreciated.  SS

[sumitsircar-yaho]

Furthermore, after a few more screens, I arrived at a screen for Your Like-Kind Exchange Results: No Taxable Gain.

The next screen says Your Like-Kind Exchange Results: Deferred Gain.

Yet the Federal taxes due still shows -$197,858 !

[MarilynG1]

You will need TurboTax Desktop as you will need to make entries on Form 8824.  Since we can't see your return in this forum, and the 1031 Exchange can be complex, here's some detailed discussion on How to Enter 1031 Exchange that may help you. 

@sumitsircar-yaho 

[lettucewacker]

I have a similar problem.  I am using a desktop CD download version of TurboTax.

I sold a residential rental and exchanged it with 1031.

In order to appropriately get the partial year depreciation for 2022 on the property I sold, in the section

Federal / Wages & Income  /  Rental Properties and Royalties / Rental and Royalty Summary

I edited the property and selected the section Sale of Property / Depreciation

I suspect this created a Form 4797, which also created a capital gain for the property which is triggering tax due now.

I separately completed section:

Federal / Wages & Income  /  Business Items / Sale of business property / like kind exchange

This section properly created form 8824 and properly identified the deferred capital gain.

So how do I enter the disposition of the rental property I sold to get the correct partial year depreciation, without also generating form 4797 which creates tax due now even though I did a 1031 exchange?

[AmyC]

It was not a sale of property and the rental section does not ask about an exchange. When going through the general property information, Do Any of These Situations Apply? Sold is the wrong answer for a 1031 exchange as the blue Learn More button will show. The easiest solution is to mark that you converted the property to personal use. Then you can use the correct number of days as a rental for depreciation. The correct amount of depreciation must be entered as part of the 8824. The goal is for the program to know you are no longer renting and did not sell the property.

You must do an 8824 for each house you purchased and pro-rate the one you sold between them. If you need help in determining the basis for the new properties, you can see another post of mine here.

Fair warning -

There are two ways to handle depreciation after a 1031. Turbo Tax only handles one method, the single schedule depreciation. It is simple, you take your new adjusted basis, begin depreciation fresh on the new property based on the type of property. The 2 new buildings could have different depreciation schedules.

[lettucewacker]

Thank you for your help.  I suspect you are correct that my form 4797 was coming from incorrectly selecting that I sold the property in general property information, Do Any of These Situations Apply?  However, my form 4797 persisted even after I went back and changed the disposition to personal use.  When I tried to delete the form it auto-generated again.

I next switched from the "Property profile" section to the "assets / depreciation" section.  I edited the asset representing depreciation for the property.  At the question, "Did you stop using this asset in 2022?" I found that it ignored my answer.  Whether I clicked yes or no, it proceeded as if I had sold the property.

I worked around this problem by going into the forms view and for the Schedule E Wks / Asset Wks, and I directly deleted all of the entries for lines 20-36.  After this it seemed like the program started to work correctly. 

I think this is a defect in the software that prevents form 4797 from being deleted once it is created.

[checkerj]

Agreed. This is defect in the logic for the disposition of a rental property. The workflow should ask "Was the sale of this property part of a like-kind exchange (1031 exchange)?". The user would then click 'Yes' and should then be taken to the screens for entering in information for the 1031 exchange.  

[callred]

Your workaround worked great for me.  I had spent hours trying all the different solutions recommended by support, and none worked, until I tried your method.  Thank you lettucewacker for finally coming up with a solution.