I am reporting a 1031 exchange on my taxes.
I reported a like-kind exchange from turbo-tax.
Do I also have to report the sales of the rental property that was involved in the 1031? When I do this, it shows a capital gain and increases my tax-burden.
The instructions aren't clear as to what I need to do.
No, do not report that the property relinquished was sold; indicate the property was given away (but not donated to charity) as of the date of the exchange.
Appreciate your feedback.
The tax software should automate this to ensure that no issues/errors can result from it.
These manual solutions are hacks and could possibly bring scrutiny from the IRS.
@suncowiam wrote:These manual solutions are hacks and could possibly bring scrutiny from the IRS.
I agree, except a lot of these entries actually just appear on worksheets in the program (that you retain for your records) and do not get transmitted to the IRS.
Regardless, the program, at this stage of development, should handle this type of transaction without having to resort to any manipulation (i.e., automatically throughout the entire process).
I just finished my taxes but not sure if these calculations are correct.
The property I relinquished in the like-kind exchange is being reported in form 4797, "Sale of Business Property".
There are two entries for the same property that was relinquished:
2392 Taproot Court 02/01/2010 05/08/2019 0. 34,308. 102,000. -30,831.
2392 Taproot Court Land 02/01/2010 05/08/2019 0. 0, 98,000. -44,636.
I see that the two entries amount to the improvements and the current list of depreciating assets. The second entry is the land amount, when I purchased the property.
The gross sales price is set to 0 for both.
Turbo tax is also reporting the same property to have a passive activity loss fo 180k in the passive activity loss worksheet when I only reported a loss of around 15k on my schedule E for the same property.
How are the depreciating assets calculated in the sale of a property that is relinquished in a like-kind exchange? This is giving me a huge tax boost to see this negative number as it is offseting my rental income gains. Is this expected? I just don't want to deal with the IRS later on, if this is invalid.
Thanks
Hi @tagteam
I just finished my taxes and saw that my passive activity loss (Form 8582) for the same property that was relinquished to be rather high. I did have a loss for this property for this year but it was much less. I'm assuming TurboTax is somehow calculating more losses based on the depreciating assets/bonus depreciations I've entered for the property.
On form 4797, it lists two entries concerning the property that was relinquished. The first entry is the bonus depreciations(e) + the initial improvement value(f). The second entry is the initial land value(f). Both entries have a gross sales price(d) of 0. However, line 7 total only matches the total rent income (line 26) of my schedule e, which is the income from all my rental properties.
Basically, turbo tax is reducing my passive activity income to 0 because of this relinquished property. Is that correct? How should the bonus depreciation and property depreciation be calculated in a like-kind exchange?
Thanks
Hi @KatrinaB48,
This thread best describes my issue. I was wondering if turbo tax is calculating the sale of my property correctly in a like-kind exchange. It is the same property that I relinquished in the exchange. The above post to tagteam best describes it.
Thanks
@suncowiam wrote:
Hi @KatrinaB48,
This thread best describes my issue. I
Which thread? @KatrinaB48 has not posted to this thread; you must be referring to a different thread.
Regardless, you should be reporting your 1031 exchange on Form 8824 and it appears as if you might be entering the transaction in the wrong section of the program.
I reported the exchange in turbo tax and it did report a 8824 form.
But it also reported a 4797 form with the same relinquished property as described earlier.
Do you know how to deal with the depreciation and bonus depreciation of a rental property that is relinquished in a 1031 exchange?
I am not certain how bonus depreciation factors into this transaction since it is not allowed for residential rental real estate. I am also not certain why a 4797 was generated unless there are additional details you did not provide.
Frankly, you should try contacting Support, via the link below, since you appear to be struggling with getting the exchange entered properly. Support has helped other users enter exchanges in the correct manner.
https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632
I can't get Turbo Tax to take me to the 8824. I sold a Rental and purchased Real Estate, had a gain on the sale. I marked sold on the asset sheet of my Sch E. Got a message about entering the new Land as an asset. Tried that and the program still didn't generate the 8824. I used the Jump to link for Like Kind and marked additional Like Kind exchange. Next screen showed what appeared to be a business or asset, not sure, that said Copy with an edit or delete option. I chose edit and it took me back to the asset sheet of the rental. You'd think I'd just get the nice straight forward questions that is on the 8824 and not a jumble of input screens. Wondering if I need to manually prepare the 8824 and override entries on Turbo Tax to get this like kind transaction completed.
@UT1470 wrote:
I can't get Turbo Tax to take me to the 8824. I sold a Rental and purchased Real Estate, had a gain on the sale. I marked sold on the asset sheet of my Sch E.
First of all, did you actually do a proper 1031 exchange (did you use an intermediary, aka exchange facilitator)? Hopefully, you did not take actual or constructive possession of the proceeds from the sale.
Otherwise, do not indicate that you sold the property in the Property Profile section of the program.
I believe that an asset is characterized as 'given away' by entering a zero sales price. But this will generate a loss, and will conflict with the entries on Form 8824. I filled out 8824 manually with my own adjusted basis calculations which included asset depreciation through the date of sale. I did this manually because I relinquished two properties and purchased one replacement property (don't think the step-by-step handles this according to my conversations with TT support). The result was carried to Schedule D (there was a small amount of boot).
To generate a 4797 loss (or series of losses - one for each asset entry) would generate a loss "outside" the 8824 bottom line/adjusted basis. It seems that I should merely enter each asset as being sold for the remaining basis on the date sold, which is the original cost less depreciation through the sold date as calculated for the year of the tax return when I entered the sold date on the asset entry. Is this correct?
Further to this: Since my gross selling costs were included in the manual 8824 calculation, I entered a zero expense of sale on the asset entry worksheets. This way there is zero gain or loss on the asset entry and propagated to the 4797 and the whole transaction "falls back to" the manual entries on 8824 as transferred to Schedule D.
And, YES, I used a QI for the complete transaction.
I sold rental properties in 2021 and did a 1031 exchange. Since I am not supposed to check the box "I sold this property", where should I indicate that "I gave the property away"?
On a separate note, I have sold 3 properties and purchased 2 houses, so can Turbo Tax Premier handle such a complex 1031 exchange? Some of the leftover funds from the first exchange were utilized in the second exchange, so I am not sure how to make it clear.
You can try the thread at the following link, but TurboTax does not really support multi-asset exchanges.
In the Property Profile section, do not check the box indicating you sold the property (as you were instructed not to do). Instead, check the box in the Assets/Depreciation section (as shown in the screenshot below).
Hello @tagteam
Could you walk through how to do this on TurboTax Online version / TurboTax Premier?
I am trying to set the relinquished property to "item was sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, or given away (or it's not longer being used in business for some reason)" per your screenshot.
Below is the the procedure that I am following from the online version:
-WAGES & INCOME
-Your 2021 Rentals & Royalties Summary
-Assets>Rental property>Edit
-Did You Stop Using This Asset in 2021? Select YES if sold, stolen, destroyed, converted to personal use, given away, taken out of service for any other reason [Hit Yes since trying to fix relinquished property in 1031 which is causing an incorrect large Passive Activity Loss in form 8582]
-Disposition Information: [Entered Date of Sale or Disposition & Date Acquired]
-Special Handling Required? You gave this asset away as a gift. [Hit YES}
-Depreciated Deduction Amount: Your amount for property is X. We'll transfer this amount to the correct form for you.
-Goes back to your Property Assets. DONE
After I've done all this it still shows (incorrect behavior) Passive Activity Loss of <262K> from the relinquished property.
How do you mark a rental property as the relinquished property in a 1031 exchange?
You might want to either contact Support (link below) or switch to the desktop version.
What is the TurboTax phone number? (intuit.com)
I am unable to provide any assistance because I do not use (and never have used) any online version of TurboTax.
However, you might want to start with entering "like kind exchange" in the search box.
@tagteam wrote:You can try the thread at the following link, but TurboTax does not really support multi-asset exchanges.
In the Property Profile section, do not check the box indicating you sold the property (as you were instructed not to do). Instead, check the box in the Assets/Depreciation section (as shown in the screenshot below).
@tagteamI just wanted to say thank you so much!! I have been trying so many different things to make this work and of course it was really that simple! I have been doing my own taxes for years using TT and never had much problem. This year was the first year I did a 1031 exchange, selling one single family home for 2 new ones.
Of course as I entered in all my rentals the one I sold I marked it as such. Then found the like-kind exchange section and entered everything there. I have been trying for days to see how the 8824 and 4797 connect so the like kind amount would wash out the gain on the 4797.... now thanks to your comments I realize we either complete one or the other NOT both!
My biggest struggle now is how to properly enter the info when exchanging one rental for two. TT doesn't seem to like that so much. Fortunately since both of the new properties were more individually than the one I sold, I think I am just going to do a one for one when I fill out the like-kind exchange info. Unless there is a better suggestion?
For anyone else trying to do this, in the rental property profile this is the box NOT to check even though you did sell the property as part of a 1031 exchange:
Then under the assets/depreciation section of the same property you will say yes that you disposed of the property in 2021, its a yes/no question and enter the date of disposition.
Then go down to business items, sale of business property and the first screen after you click into that section will give you some check boxes. Select the one for like-kind exchanges (1031) and enter the info!
if you do the assets section, make sure you do not enter figures for a sales price and basis. if you do, the program will calculate a gain or loss (which generates a 4797).
@tagteam wrote:if you do the assets section, make sure you do not enter figures for a sales price and basis. if you do, the program will calculate a gain or loss (which generates a 4797).
Yes I had made that mistake too the first time I tried to "fix" my return... then realized this was causing the issue. Once I deleted those amounts the 4797 disappeared from my return. 🙂
I was so set to go out a hire a tax professional to help me!!
The first support agent could not tell me how the specific procedure to get to form 8824 to do the like-kind exchange. The second agent email me the specific instructions and it work. I have to start all over again with those instructions, because I could not get rid of the capital gain already got reported without the like-kind exchange.