How to report 1031 exchange of two properties to one property

Forum|Forum|3 years ago
April 17, 2023
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Please help !

Can Turbotax 2022 handle 1031 exchange of two properties for one property ?

I think I need to enter two 8824 Forms on Turbox, but should I split the FMV of received property into 50% 50% among two 8824 Forms ?

I cannot find any information on this topic in Turbotax Community.

Thank you !!!

TurboTax Home & Biz Windows

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 are not completed. Rather, you must attach your own statement (and the IRS requires that a statement be attached to your return) showing how you calculated 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)

To enter this type of exchange into TurboTax, you will need the CD/download 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.

@jmail

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jmailAuthor

Thank you very much @GeorgeM777 for the guidance !

I have CD version of Turbotax and I can view and edit the Form 8824.

But how many Form 8824 do I need to create in Turbotax ?

If I only create one Form 8824, since Lines 1-6 on Form 8824 are only for one property, how can I enter two addresses, and various dates on one 8824 Form ?

In addition, how to fill in California Form 3840 ? One Form 3840 or two Form 3840 with received value split between two given-up-properties ?

GeorgeM777

Just one Form 8824. Lines 19 - 25 will have your realized and recognized gain. Your attached statement should have all of your information about your properties, addresses, dates of exchange, etc. including how you arrived at the information you entered on lines 19 - 25.

California is different in that it requires a separate Form 3840 for each exchange. Below is information about multi-property exchanges effected in CA that was obtained from the CA Franchise Tax Board website.

G. Multiple Exchanges

If the taxpayer reported more than one like-kind exchange for federal purposes in which the taxpayer gave up California property and acquired out of state like-kind property, file a separate form FTB 3840 for each such exchange.

H. Multiple Asset Exchanges

A multi-asset exchange involves the transfer and receipt of more than one group of like-kind properties. For example, an exchange of land, vehicles, and cash for land and vehicles is a multi-asset exchange. An exchange of land, vehicles, and cash for land only is not a multi-asset exchange. The transfer or receipt of multiple properties within one like-kind group is also a multi-asset exchange. Special rules apply when figuring the amount of gain recognized and basis in properties received in a multi-asset exchange. For details, see Treas. Reg. Section 1.1031(j)-1. For more information, see instructions for federal Form 8824, Like-Kind Exchanges.

Here is the link to the CA Like-Kind Exchange webpage.

CA Like-Kind Exchange

@jmail

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