1031 exchange

Forum|Forum|2 years ago
January 31, 2024
4 replies
31 views

In 2023, I did my first 1031 exchange, using a Qualified Intermediary. All was by the book and now I'm working on my taxes. I can see how to enter the 1031 information such that TurboTax completes form 8824 properly to defer my capital gains. However, If I enter the date that I sold my rental property when I'm working on that particular property, it also generates form 4797 and gives me the capital gain back. How do I keep that from happening?

Ask the Experts - Early Filers - Jan 2024

Anonymous_

Level 15

How are you entering the transaction?

You should be entering the transaction in the Sale of Business Property section of the program.

Anonymous_

Level 15

MikeB201Author

Level 2

Yes, I entered info there which generated the form 8824. But if I enter information in the "your property assets" area, and proceed to "disposition information" and enter the date of the sale there, it then also creates form 4794 and gives the capital gain back.

AmyC

Level 15

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.

Fair warning for the new rental:

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 new building could have different depreciation schedules.

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MikeB201Author

Level 2

OK, thanks for the advice! Continuing on...When the program asks if I want to report this transaction, do I assign it to a rental (schedule E) and then assign it to the relinquished property?