Turbo Tax problem with 1031 exchange

Forum|Forum|4 years ago
March 30, 2022
1 reply
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Turbo Tax message indicates that my capital gain on a 1031 exchange is being “deferred”, BUT the dollar amount continues to show up as a taxable capital gain, and is being taxed. How can this be resolved?

TurboTax Home & Biz Windows

Anonymous_

Employee

Where are you seeing that the gain is taxable?

Have you checked Forms Mode?

AdamSternAuthor

Tagteam - thank you. The gain from the sale of the 1031 exchange "relinquished" property is pulling through to Line 7 on Form 1040 - and creating a tax liability. I am being taxed because when I delete the Sale of Business Property in the Step by Step mode - my tax liability drops dramatically - even though I checked "like-kind echange".

The 1031 sale gain on Line 7 on Form 1040 is coming in from line 11A on Schedule D, which is coming from line 7 on Form 4797, which comes from page 2 of Form 4797 (line 32b), which comes from lines 20 through 24 on Form 4797 on which I've entered: 20 Gross Sales Price : $310,000 (from 1099-S), 21 Cost or other basis plus expense of the sale: $283,622, 22 Depreciation: $105,037 (from ~17 prior years of straight-line depreciation on a 27.5 year schedule), 23 subtract 22 from 21: $178,585, and finally 24 Total gain subtract 23 from 20: $131,415. Which seems to be pulling through to line 7 of Form 1040. I am not able to get TurboTax to actually "defer" this gain by reducing the basis of the acquired property in the 1031 exchange - EVEN THOUGH - I get the message "Your LIke Kind Exchange Results: Deferred Gain".

I have been traced through Forms mode, made all kinds of adjustments, tested ideas - to no avail. I used a qualified intermediary.

(And to complicate matters, I relinquished one property on 09/29/2021 ($310,000), and exchanged it for two properties 11/18/2021 ($180,000) and 01/05/22 ($169,900) As test, I put the value of BOTH properties ($349,900) onto the 11/18/2021 purchase - just to confirm that the gain gets deferred. NEXT I was going to figure out how to do the actual 1 for 2 exchange straddling 2021 and 2022 - but I didn't even get that far).

Any thoughts?

Thanks Tagteam.

-Adam