For Like Kind Exchange, what amounts should I put in the TurboTax fields?

[Jeff-W]

Hi,
I have tried putting what I believe are the correct dollar amounts in the (Desktop 2024) TurboTax fields for doing a Like Kind exchange. But in a few screens later, TurboTax tells me that my amounts do not add up correctly.

Here are the numbers from the Sale and Purchase of the rental properties.
-------------------------------------------------------------
Old property bought in: 4/6/2006 for: $ 388,562
Depreciation taken during rental: $ 124,516
Adjusted basis ($388K - 124K) of: $ 264,046
Old property sold on: 10/31/2024 for: $639,000
Fair Market Value of: $639,000

Total selling fees paid out of the $639K received: $35,161
(for commission, transfer tax, attorney, recording)
No mortgages/loans transferred or paid off.

New property bought on: 1/24/2015 for: $598,679
also paid fees of: $2,860
So, Fair Market Value ($598K + 2.8K) of: $ 601,539
No loans assumed.

Remaining 'Boot' cash payment received of: $2,300

============================================================

Here are the amounts I entered into Turbo Tax

I navigate to this screen using the "I will guide myself" method.
Screen: "Like-Kind Property Given Up" (the old property I sold)
-------------------------------------------
"Date you acquired the original property": 4/6/2006
"Date you transferred this property to new owner": 12/31/2024
"Adjusted basis of like-kind property you gave up": $ 264,046
"AMT Adjusted basis of Like-Kind property you gave up": $ 264,046
"Fair Market Value of Like-Kind property you gave up": 639,000.
"Value of mortgages/loans transferred or paid off as part of Sale": $ 0

[I Checked] the Box next to: "The like-kind property I exchanged was used in a trade, business, or rental."
[I did Not check] the box next to: "The exchange is eligible for an extension of time to meet the 45-day and 180-day requirements."

Then I get this screen -
Screen: "Like-kind property received" (the new property I bought)
----------------------------------------------------------------------
"Fair Market Value of the like-kind property received": $ 601,539
"Date you actually received the property": 01/24/2025
"Date the property you received was identified": 11/15/2024
"Loans assumed with property you received": $ 0

The next screen is called "Related part exchanges".
------------------------------------------------------
It asks: "Did you make this exchange with a related party?"
I selected "No".

Then I get a screen called "Different property given up".
-------------------------------------------------------------
It asks: "In this exchange, did you also give up any items other than cash that are different in character and nature than the main property that was the subject of the exchange?"
I select "No".  (because I did not give up any other property.)

The next screen is called "Different property received".
--------------------------------------------------------
note: I did not receive any other property.
It asks. . .
"Description of the other property received.": I leave it blank.
"Fair Market Value of the other property received.": I leave this blank.
"Promissory (or installment) note received.": I leave it blank.
"Cash received.
(Include cash used for exchange expenses and not directly received)"
I entered: $2,300 (because I thought perhaps I was supposed to enter the 'boot' amount here.)

I click on the "Continue" button and I get this message in red text:
"Based on your previous entries for items exchanged, these values must add up to at least $ 37,461"

So, any idea as to what am I doing wrong?

Thanks for any help,
Jeff

[Mike9241 · Accepted solution]

i would say this is really the fault of Turbotax for failure to provide an explanation but if you look at line 15 of the actual 8824 it will say something like this cash received reduced by exchange expenses 

for cash received, it wants you to include the exchange expenses, so cash received 37461. you should end up with a taxable gain of 2300. Turbotax will not create the new asset. Also, you'll need to keep track of the depreciation taken on the original property since that will remain subject to the recapture rules

[Jeff-W]

Hi Mike (and/or other folks),
    I am sorry for the delay in getting back to this. I ended up getting side tracked which resulted in a couple of new Questions?
And I was wondering if the values I would use in forms 8824, 4797 and Schedule D look ok?

- When I look at the fields in the form 8824, I do not see places to enter:
     * Given Up Property's initial Basis
     * Given Up Property's FMV / Sales price
- What happens to the Sales Expenses of the Given Up Property?
     * Are Sales Expenses supposed to be added to the basis of the Replacement property?
               Or
     * Are Sales Expenses used (some where behind the scenes) to decrease realized gain?

Thank you for any help with these last questions,
Jeff

Below is the Exchange Info and Values that would be entered on forms 8824, 4797 and Schedule D. To make this part of the note shorter I skipped some Sections or Lines.

----------------------------------------
Here are the numbers from the Exchange.
----------------------------------------
Property Given Up cost: $ 388,562
Depreciation taken Given Up property: $ 124,516
    straight-line - no recapture needed
Given Up Adj basis ($388K - 124K) of: $ 264,046
Given Up property FMV - Sold for: $639,000
     No mortgages/loans transferred or paid off.
Not between related parties.
Given Up sales / exchange expenses: $35,161
    for commission, transfer tax, attorney, recording

Received Property cost: $598,679
   plus fee paid from Sales proceeds:$2,860
Received Property FMV: $ 601,539
No loans assumed or used.

Remaining 'Boot' cash payment received: $2,300
No 'not like-kind' property was involved.

------------------------------------
Cash flow of the "Exchange bucket"
------------------------------------
Cash from Given Up Sale: + $ 639,000
less Sales expenses: - $ 35,161
less cost of Received: - $ 598,679
less Received property fees: - $ 2,860
Less Boot payment: - $ 2,300
Bal at end of exchange: $ 0

---------------------------------
Values used for the Form 8824
---------------------------------
15) Cash received, etc: 2,300
15a) description: "cash boot"
16) FMV of like-kind property received: 601,539
17) Add lines 15 and 16: 603,839
18) Adj Basis of property Given Up: 264,046
19) Realized Gain (subtract line 18 from 17): 339,793
20) Enter smaller of line 15 or line 19: 2,300
21) Ordinary Income under recapture rules: 0
22) Subtract line 21 from line 22: 2,300
23) Recognized gain (add lines 21 and 22): 2,300
24) Deferred gain (subtract line 23 from 19): 337,493
25) Basis of like-kind property received: 264,046
         (subtract line 15 from the sum of line 18 & 23)
     25a) Basis of like-kind section 1250 received: 264,046
     25b) Basis of like-kind section 1245 received: 0
     25c) Basis of like-kind intangible property received: 0

-------------------------------------------------------
Values entered in Form 4797 Sales of Business Property
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5) Section 1231 gain from like-kind exchanges from 8824: 2,300
7) Combine lines 2 thru 6: 2,300

------------------------------
Values entered in Schedule D
------------------------------
11) Gain from form 4797...or 8824: 2,300
15) Net long-term capital gain: 2,300

Thanks Again,

     Jeff