Completed 1031 exchange is not reducing capital gains

Forum|Forum|1 year ago
March 17, 2025
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Hi. I completed a standard 1031 exchange, sold old rental and bought a new rental 30 days later for an increase to the mortgage amount and purchase price. I have completed forms 8824 and 4797, but the $300k in deferred gain on the completed forms is not reducing my capital gains amount on 1040. Causing a large tax hit. Form 4797 line 16 shows no entry.

Thank you!

Hi Palms

Employee

If you had no boot and did a standard exchange you shouldn't have a 4797 at all. You must have entered the figures wrong.

chill444Author

Thank you for your help... This is the first 1031 I have done. To my understanding I should not have a boot, but please correct me if I am wrong. Sold a SFR for $410k and bought a SFR for $610 within 30 days. Paid off a mortgage of $187k and acquired a mortgage of $237k on the new purchase. I did have to split the numbers between land and building inside of TT, but I tried to follow the instructions diligently. Not sure what question in TT triggered the 4797 form.

Hi Palms

Employee

You should not have had boot with those numbers. There must have been some sort of error when the transaction was keyed into the program. Unfortunately, no one can see your return so you might have to call customer service to find the error.

AATUSK

First time doing 1031 exchange as well. Went through the same issue. These messages were very helpful in figuring out where to look.

I had this question - " The item was sold, retired, stolen, disposed of converted ...." in the section "Tell us more about this rental asset" checked. This is under the Business Income & Expenses tab.

Once this question was unchecked; sale of business property will revert to zero

This also removes 4797 from the return.

In a Like-kind exchange the original asset is not being sold (on paper).