1031 exchange

[DanoUnusual]

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?

[tagteam]

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]

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.

[tagteam]

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@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.

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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.

[Jim-Thompson]

Now I get it!  Seems so obvious now . . . .  Thanks so much for the clarification and the prompt response!

[Jim-Thompson]

I'm having a lot of trouble with my 1031 exchange reporting.  My Qualified Exchange Intermediary provided instructions for completing the Form 8824; when I work through the "like kind" questions in TT, the results I get for deferred gain and new property basis are wildly different from what I obtain using my QEI instructions.  Anyway, here are two specific questions:  my QEI says that as a result of a change in regs in 2007, one can now treat the entire replacement property as a new asset for depreciation purposes, rather than carrying forward an "exchanged basis" and "excess basis" as the basis for depreciation.  How do I make this election in TT, i.e., to have my replacement property treated as a new asset?  Second:  in stepping through the "like kind" procedure in TT, there is a page titled "Like Kind Property Received" that has 4 boxes for data entry, the last of which says: "Loans assumed with property you received."  I did not "assume" any loans, but I did incur a loan on the replacement property.  Do I enter that amount here, or leave it blank?  There doesn't seem to be any other place to enter new loan information.

[tagteam]

Leave that box blank because you did not assume any loans when you acquired the property (i.e., it appears that you secured a new loan).

You can elect out under the Regs but you have to make that election (which I do not believe TurboTax supports) by writing a heading on Form 4562.

See https://www.expert1031.com/sites/default/files/ElectingOut.pdf

The ultimate issue here is whether electing out will be advantageous for your particular tax situation. With that as a consideration, I would strongly urge you to seek professional tax guidance before making a decision.

[martadidomenico64]

Hi all!

This is a great resource.

I started and completed a 1031 exchange in 2017.  Sold 1 and bought 1 property, so it should be easy.

However, TT is generating a schedule D (with the sales value of the relinquished property), a form 4797 (with the negative value of what's in schedule D and a form 8824. 

Am I supposed to have all of these forms?  I think I'm doing something wrong.  I am also not seeing the accumulated loss carryover from previous years. 

Thank you all!

[pixelrogue1]

Did you ever get an answer, or figure this out? We are in the process of recording the 1031, with the same concerns.

The "Like-kind property received" section appears to not be connected in any way to the sold property, nor the new purchased property. We need the loss-carry forwards and 1031 benefits to reflect.

[tagteam]

If you search this board for "1031", you will get quite a few results. However, you will also find that the process of entering an exchange is not exactly a simple matter, either in TurboTax or any consumer-level tax preparation software. 

With respect to carryforwards and the like, you need to enter those manually; the 8824 section is simply far short of being comprehensive.

[pixelrogue1]

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?

[tagteam · Accepted solution]

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

[pixelrogue1]

Will do.

[bicichica]

Hello,

how do you report in TT the sale in 2019 of stepped up rental property that was inherited from deceased spouse in 2017 when the property was originally purchased 15 years ago as part of 1031 exchange and prior to death? 

Because the purchase date and cost basis started anew on the inherited property, does the reporting of 1031 exchange funds also go away?

[tagteam]

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@bicichica wrote:

Because the purchase date and cost basis started anew on the inherited property, does the reporting of 1031 exchange funds also go away?

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Yes, property that is acquired from a decedent (that is included in the gross estate) is stepped up to its fair market value as of the date of death (which would be in 2017).

Of course, generally, only one-half would be stepped up if the property were held jointly with the other spouse.