1031 exchange

Forum|Forum|6 years ago
September 23, 2019
3 replies
34 views

I started and completed a 1031 exchange on rental property in 2018. Turbo tax has going through the transaction as a sale of the asset and then has me do the same on 1031 area of questions. Turbo Tax is counting the transaction twice. How do I get around this?

Best answer by Anonymous_

Yes, I am starting to see that. 😐 I have been looking through the 1031 posts, all w/good questions, good info.
As I am trying to at least capture the basics, here is what I am running into...

Situation

Purchased one investment property, straight forward. Purchase was Q4 2019, not rented until 2020.
Purchased one investment property via 1031 Exchange. Purchase was Q4, 2019, not rented until 2020.
Each property had upgrades and such added in 2019 and 2020 prior to being rented.

Plan

Add both properties to Schedule E for 2019 return.
Assets for would be added to 2019 return with NO inservice date. Inservice dates to be added for 2020.
Mortgage interest, taxes for said properties would be added to Schedule E.
Capitalize those improvement expenses as part of the basis for each of the properties.

Hiccups

TT wants to delete the properties from 2019 return, as they were not rented.
1031 Exchange via TT <Like-kind> does not seem to connect to relinquished nor acquired properties

Questions

Where and/or how are those expenses capitalized in TT?
In addition to those hiccups above, there appears to only be one field for Basis in the 1031 exchange. This does not seem to calculate or even reference any of the data from prior years on improvements. Had the property over 10 years, there has been a lot of work over the years. Am I expected to pull out a pad & pen and comb through over a decade of data to calculate?
At the end of the Like-kind process, TT displays the basis of the new property. Well, not seeing how I can add in the 2019 improvements for the new purchase basis. Would that 'basis' field be inclusive for BOTH properties, add in expenses from both sides (I don't think so, that wouldn't be right.) How would I adjust the basis of the new property to include improvements?
Based on the info so far, we are instructed NOT to state we 'sold' the investment property, because the exchange process is not a sale. Got it. Now what happens, though, to the Schedule E and such for 2020 taxes? Do we just DELETE the sold property when processing 2020 tax return?
Presuming the relinquished property is removed from the 2020 return, what connects the 1031 to the new property for the 2019 or 2020 return?

You should really contact Support (link below) during regular business hours.

They have been successful in the past with walking users through the process of entering the basic figures in 1031 exchanges.

https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632

Anonymous_

Level 15

You might want to try entering the transaction by starting with typing "like kind" in the Search box and clicking the "Jump to" link. Doing so will take you to the screen in the screenshot below where the program will walk you through the entire transaction.

Jim-Thompson

Level 2

I did a like-kind exchange of one residential rental property for another in 2018. Just curious: why would I check the box labeled "Any additional like kind exchanges (section 1031)" as opposed to the first box labeled: "Sales of business or rental property that you haven't already reported. (This includes certain farmland, mineral, or conservation property.) Is it because the first box denotes exchanges that are some other kind of exchange rather than a 1031 exchange? What throws me off is the mention of "rental property" in the first box. From my point of view, that is the kind of property that I exchanged.

Anonymous_

Level 15

@Jim-Thompson wrote:

What throws me off is the mention of "rental property" in the first box. From my point of view, that is the kind of property that I exchanged.

The first box involves the actual sale of property, not an exchange. When you select the first box, your transaction winds up on Form 4797 which is definitely not what you want with a 1031 exchange.

By selecting the section 1031 box, the transaction is reported on Form 8824, which is correct.

ashutoshsharmaindia

Level 4

I am getting no help from Turbotax regarding this. Talked to few tax experts and CPA from turbotax.

I sold one property and bought two replacement via 1031 exchange via QI. I was asked to combine both the replacement property. One of the property, during the last 5 years - 6 months it was our primary residence. Due to that IRS clearly states that we will get partial exemption. But Turbo tax told us to get the taxes done from outside as it's not possible to do all this.

IRS clearly states this:

(contains worksheet to figure partial exclusion)

But not getting any help from Turbotax

Mike9241

Level 15

what they probably meant is that this can not be done using Turbotax. There are multiple situations that are so infrequent Turbotax doesn't program for them.

if it can be done, someone will probably respond with the steps you have to go through

Mike9241

ashutoshsharmaindia

Level 4

What are the options for me? Hire outside CPA. I am all done with my taxes except this one? Most of the CPAs that I came across were of Asian Indian origin who outsource their work to offshore or junior employees who make so many mistakes that i need to file at least 2 amendments. End of the day I need a file.tax2022 for my next year to be used in Turbo Tax. I am filing on my own for more than 15+ years and unless I find somebody better than me to do this job(in fact I am willing to pay $400 or $500 also for this) I am not comfortable doing that.

Mediagenie

Level 2

Here's what I figured:

Go to the property that was sold.
In the property Profile, checkmark “Sold”.
In Assets and Depreciations, select the real property and log the sales date. Log the previous depreciations for this property, you need this later. Also log the current year depreciation in next step. Total depreciation should be recaptured during 1031 exchange filing.
When questioned if a special treatment is required, select “Yes”. (Note that “like-kind” exchange is not listed as a condition for special treatment. Still, select Yes. Then entering sales price, cost basis, etc. is skipped. If No is selected, the you need to enter this information, and TurboTax will calculate capital gains tax based on this info and generate form 4797. Basically, “special treatment” means you need to manually override this sales info. So, select Yes here.)
When all properties are done, go to “Less Common Business Situations” and select “Sale of Business Property” (for Turbo Tax Home and Business. Premier should have similar option, too).
Select “like-kind exchanges” then follow instructions.