Form 8824 for exchange from one property to two properties

[lookicu812]

Hi,

Original property cost = 109000

Original property selling price = 800000

Purchased 2 properties:

Rental 1 cost = 612100

Rental 2 cost = 425000

Question - How do I do this in turbotax? I can do this fine for one property but cannot add for the second one. Do I create 2 like kind exchanges and cut the original property cost basis and selling price in half?

Thank you!!

David

[GeorgeM777]

You cannot enter a multiple property exchange in TurboTax using the method you describe in your post.   In a typical 1031 exchange where one property is exchanged for another property, TurboTax will prepare Form 8824, Like-Kind Exchanges, and lines 12 - 18 will reflect, among other things, the realized gain, recognized gain, the fair market value (fmv) of the property you received, and your adjusted basis in the property you transferred.  However, in a multi property exchange, lines 12 - 18 on Form 8824 are not completed.  Rather, you must attach your own statement showing how you figured the realized and recognized gain and enter the correct amount on lines 19 through 25.  (Note: the realized gain is the difference between your adjusted basis and the fmv of the property.  The recognized gain is that portion, if any, of the realized gain that is taxable).  TurboTax cannot upload your statement, thus you will have to print out your return, include the statement with your return, and then mail your return to the IRS. 

It is necessary that you use the desktop version of TurboTax because the entries you will make on lines 19 through 25 have to be manual entries.  Manual entries are effected by selecting Forms mode, upper right of your screen, and from the list of forms in the left margin, select Form 8824.  If you don't see Form 8824 in your list of forms, then select Open Form and in the search window enter Form 8824, then select Open Form again.  When Form 8824 is open, double-clicking in various fields will allow you to enter information.  

[lookicu812]

ok, thank you so very much!

Is there an example anywhere of a worksheet that can be used in this scenario?

Thanks again!

[DianeW777]

The IRS doesn't actually provide a worksheet however you may find one online by searching. Below is an example to assist you.

If you receive cash, relief from debt, or property that is not like-kind, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

• IRS Fact Sheet-1031 Exchange
• Instructions Form 8824

Here are some notes and steps that may make the process easier for you to complete your 1031 exchange.  

• You should indicate it was rented all year just like you never gave it up when entering the original property basis in each new property.

The new property is treated like it was the old property, in other words nothing changes except that you may have a new asset to place in service (add as a new asset) for any buy up/added cash on the exchange.  Below are instructions that should help you complete the process and/or review your own steps.

Example to arrive at asset cost basis for each new property:

In your example you have a total purchase value of the two properties received of $1,037,100 ($612,100 + $425,000) or when dividing each by the total you have the following percentages for the two properties received:

1. Rental 1 = 59%
2. Rental 2 = 41%

• You can use these percentages on the remaining basis for building and land on the original basis of the property traded to enter as an asset for each of these properties (use the original date placed in service).
• Likewise for your new asset (any money, debt or other property given up in addition to your property traded) use these percentages to arrive at the cost basis for a new asset placed in service on the day of the exchange.

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

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

@lookicu812 

[lookicu812]

ok, thank you very much for this. This helps. So do I create2 exchange entries each with these percentages or just one? I'm assuming only one and then the worksheet, correct?

[RobertB4444]

Just the one entry and then the worksheet.  That is correct.

@lookicu812 

[lookicu812]

ok Thank you VERY much for your help. Very much appriciated! 🙂