Thank you for the video, very helpful. I too needed this. My wife and I bought a property in 1988 (86K) with a friend. Sold the property in Sept 2023 (420K). My wife and I took our half and invested in a Delaware Statutory Trust - two properties which totaled our half. Part II of Form 8824 - do I identify my wife as a related party? I divided all the costs and profits in half to complete Part III, lines 16 -25. Is that correct? We file a joint tax return.
I'm not sure that I have all the information to give you affirmative answers, but I'll do my best. As always, I recommend that you discuss this with a tax professional. Unless you conducted the exchange with your wife as the other party (i.e. you sold a property to her, or a business owned by her), then that would be a related party transaction. As it stands, I don't think this would be considered one, but you should have someone professionally prepare your returns so they can get a closer look at the specifics here. I don't believe that you would divide everything in half. If you and your wife are reporting the transaction on the same tax return, I believe that you would report everything from the transaction without dividing it in half. Again, I would strongly advise that you have someone take a closer look at the details and give an informed opinion.
Thank you. Do you have any video explaining what would happen when we end up selling a property acquired through 1031 exchange? (in your example, how do we factor the deferred gain and new basis when we sell that $210,000 property?)
I don't have a video on that. If you have a real-life example, feel free to email it to me, and I can create a video out of it. For this video, the basis for the property that we received (Line 38) would become the new basis when we sell it, with any adjustments that you make during your ownership period. If you're selling through another 1031 exchange, that basis would go into Line 13 as adjusted basis.
Very helpful video! How would you file this form if you sold one single family home and acquired two single family homes? And paid some amount of money out of pocket for the second home? Thanks
If you sold a home, then used the money to purchase another home (or 2 homes), then it might not be a like-kind exchange for tax purposes. If you sold your primary residence and meet the ownership and use rules (in general, you must have owned and used the home as your primary residence for 2 of the prior 5 tax years), then you could simply exclude up to $250,000 in capital gains from your taxable income. If you can't exclude the capital gain because of that, then there are very specific criteria that you would have had to follow to make this a tax-deferred exchange (also known as a Section 1031 exchange or Starker exchange). You probably should discuss this with a tax professional to understand if you can do this, or if the IRS would disallow your tax deferral.
Thank you! One question: why 0 in #21, for example if I rent the house for 10 years and depreciated total $100000 in 10 years, shouldn't I fill #21 with $100000?
It depends on your circumstances. Here is what the form instructions say for Line 21 with regards to Section 1250 property (residential rental real estate): Section 1250 property. Enter the smaller of: 1. The gain you would have had to report as ordinary income because of additional depreciation if you had sold the property (see the Form 4797 instructions for line 26); or 2. The larger of: a. The gain shown on line 20, if any; or b. The excess, if any, of the gain in item 1 above over the FMV of the section 1250 property received. If you look at the Form 4797 instructions for Line 26, they say to enter '0' in Line 26g (representing Line 26) if you used straight-line depreciation. The larger amount of gain (subject to ordinary income tax) would be any additional depreciation you took on that property. You could also come up with scenarios in which #2 meets the mark, most notably by not having a gain in Line 20.
Thank you so much! I did 1031, acquired property is cheaper than the property given up so I wonder if I have to fill out #21 with the depreciation I took, sounds like I don't need since I did straight line depreciation. Wonder if you know some accounts who help fill out form 8824. Thanks again for your kindness!
We sold one single family rental to buy another and the transaction went through a 3rd party exchange company. Trying to complete this form. For line 15 would that be any excess money returned to us from the exchange company? The property given up was purchased for 260k and sold for 330k minus 20k in closing costs. $311k was sent to 1031 3rd party transfer company. The new property was purchased for 300k plus closing costs. How do I determine line 16? FMV is the purchase price ( it was actually valued higher) How do I determine the adjusted basis for line 18? Thanks so much this video was very helpful
Line 15 should be the money that you received from the intermediary. You might want to double-check your Form 1099-S (which you should have received a copy of--see below links). You should use the purchase price for Line 16. For Line 18, you'll have to calculate this based on the following instructions: Include on line 18 the sum of: • The adjusted basis of the like-kind real property you gave up; • Exchange expenses, if any (except for expenses used to reduce the amount reported on line 15); and • The net amount paid to the other party-the excess, if any, of the total of (a) any liabilities you assumed, (b) cash you paid to the other party, and (c) the FMV of the other (non-like-kind) property you gave up over any liabilities assumed by the other party. IRS Form 1099-S, Proceeds From Real Estate Transactions Article: www.teachmepersonalfinance.com/irs-form-1099-s-instructions/ Video: ruclips.net/video/IaBc5bwqnfo/видео.html
According to the form instructions, if you received cash or other non like-kind property, then you would use Part III to report the transaction and calculate any taxable gain.
Generally speaking, a realized gain is the amount of capital gain that you would realize at the end of a transaction. Recognized gain is the part of realized gain that you pay taxes on. According to IRS Publication 544, you might need to report recognized gain on either IRS Form 8949, Schedule D, or IRS Form 4797, depending on the circumstances (see links below). For example, in a like-kind exchange, you would generally only pay tax on the 'boot,' or cash and non-like kind property received, as part of a transaction. IRS Form 8949, Sales and Dispositions of Capital Assets Article: www.teachmepersonalfinance.com/irs-form-8949-instructions/ Video: ruclips.net/video/O5P_L9zdXME/видео.html IRS Schedule D, Capital Gains and Losses Article: www.teachmepersonalfinance.com/irs-schedule-d-instructions/ Video: ruclips.net/video/wpPXe8z40lY/видео.html Playlist: ruclips.net/p/PLYHzJrFFCrpx8fntib5MeAQ7xMEfvPVHZ IRS Form 4797, Sales of Business Property Article: www.teachmepersonalfinance.com/irs-form-4797-instructions/ Video: ruclips.net/video/2eEaDPh97Zc/видео.html
Cash received from a like-kind exchange goes onto Line 15. From there, you'd complete the rest of the form to determine the taxable amount of any gain.
IRS Form 8824 does allow you to report multi-asset exchanges, but you may need to attach your own statement showing how you figured the realized and recognized gain, and enter the correct amount on lines 19 through 25. Then, you would report any recognized gains on your Schedule D (Form 1040); Form 4797, Sales of Business Property; or Form 6252, Installment Sale Income, whichever applies: IRS Schedule D, Capital Gains and Losses Article: www.teachmepersonalfinance.com/irs-schedule-d-instructions/ Video: ruclips.net/video/wpPXe8z40lY/видео.html Playlist: ruclips.net/p/PLYHzJrFFCrpx8fntib5MeAQ7xMEfvPVHZ IRS Form 4797, Sales of Business Property Article: www.teachmepersonalfinance.com/irs-form-4797-instructions/ Video: ruclips.net/video/2eEaDPh97Zc/видео.html IRS Form 6252, Installment Sale Income Article: www.teachmepersonalfinance.com/irs-form-6252-instructions/ Video: ruclips.net/video/PAeflip0oFk/видео.html In this situation, you might consider hiring a tax professional to help you complete your tax return.
Please feel free to check out our article, where we've written step by step instructions to help you walk through this tax form! www.teachmepersonalfinance.com/irs-form-8824-instructions/ If you’re looking for tutorials for other IRS Forms that you can file directly through the IRS website, check out our free fillable forms page: www.teachmepersonalfinance.com/free-fillable-tax-forms/
I am a real estate agent and tax professional. I am just learning this form. Thank you for teaching this. It has saved me this tax season!
Thank you for the video, very helpful. I too needed this. My wife and I bought a property in 1988 (86K) with a friend. Sold the property in Sept 2023 (420K). My wife and I took our half and invested in a Delaware Statutory Trust - two properties which totaled our half. Part II of Form 8824 - do I identify my wife as a related party? I divided all the costs and profits in half to complete Part III, lines 16 -25. Is that correct? We file a joint tax return.
I'm not sure that I have all the information to give you affirmative answers, but I'll do my best. As always, I recommend that you discuss this with a tax professional.
Unless you conducted the exchange with your wife as the other party (i.e. you sold a property to her, or a business owned by her), then that would be a related party transaction. As it stands, I don't think this would be considered one, but you should have someone professionally prepare your returns so they can get a closer look at the specifics here.
I don't believe that you would divide everything in half. If you and your wife are reporting the transaction on the same tax return, I believe that you would report everything from the transaction without dividing it in half. Again, I would strongly advise that you have someone take a closer look at the details and give an informed opinion.
Thank you. Do you have any video explaining what would happen when we end up selling a property acquired through 1031 exchange? (in your example, how do we factor the deferred gain and new basis when we sell that $210,000 property?)
I don't have a video on that. If you have a real-life example, feel free to email it to me, and I can create a video out of it.
For this video, the basis for the property that we received (Line 38) would become the new basis when we sell it, with any adjustments that you make during your ownership period. If you're selling through another 1031 exchange, that basis would go into Line 13 as adjusted basis.
Very helpful video! How would you file this form if you sold one single family home and acquired two single family homes? And paid some amount of money out of pocket for the second home? Thanks
If you sold a home, then used the money to purchase another home (or 2 homes), then it might not be a like-kind exchange for tax purposes. If you sold your primary residence and meet the ownership and use rules (in general, you must have owned and used the home as your primary residence for 2 of the prior 5 tax years), then you could simply exclude up to $250,000 in capital gains from your taxable income.
If you can't exclude the capital gain because of that, then there are very specific criteria that you would have had to follow to make this a tax-deferred exchange (also known as a Section 1031 exchange or Starker exchange). You probably should discuss this with a tax professional to understand if you can do this, or if the IRS would disallow your tax deferral.
Thank you! One question: why 0 in #21, for example if I rent the house for 10 years and depreciated total $100000 in 10 years, shouldn't I fill #21 with $100000?
It depends on your circumstances. Here is what the form instructions say for Line 21 with regards to Section 1250 property (residential rental real estate):
Section 1250 property. Enter the smaller of:
1. The gain you would have had to report as ordinary income because of additional depreciation if you had sold the property (see the Form 4797 instructions for line 26); or
2. The larger of:
a. The gain shown on line 20, if any; or
b. The excess, if any, of the gain in item 1 above over the FMV of the section 1250 property received.
If you look at the Form 4797 instructions for Line 26, they say to enter '0' in Line 26g (representing Line 26) if you used straight-line depreciation. The larger amount of gain (subject to ordinary income tax) would be any additional depreciation you took on that property. You could also come up with scenarios in which #2 meets the mark, most notably by not having a gain in Line 20.
Thank you so much! I did 1031, acquired property is cheaper than the property given up so I wonder if I have to fill out #21 with the depreciation I took, sounds like I don't need since I did straight line depreciation. Wonder if you know some accounts who help fill out form 8824. Thanks again for your kindness!
@@hzhang9024 If you want to email me, I can put you in touch with a CPA, if that's what you would like: forrest@teachmepersonalfinance.com
We sold one single family rental to buy another and the transaction went through a 3rd party exchange company. Trying to complete this form. For line 15 would that be any excess money returned to us from the exchange company?
The property given up was purchased for 260k and sold for 330k minus 20k in closing costs. $311k was sent to 1031 3rd party transfer company.
The new property was purchased for 300k plus closing costs.
How do I determine line 16? FMV is the purchase price ( it was actually valued higher)
How do I determine the adjusted basis for line 18?
Thanks so much this video was very helpful
Line 15 should be the money that you received from the intermediary. You might want to double-check your Form 1099-S (which you should have received a copy of--see below links).
You should use the purchase price for Line 16.
For Line 18, you'll have to calculate this based on the following instructions:
Include on line 18 the sum of:
• The adjusted basis of the like-kind real property you gave up;
• Exchange expenses, if any (except for expenses used to reduce the amount reported on line 15); and
• The net amount paid to the other party-the excess, if any, of the total of
(a) any liabilities you assumed,
(b) cash you paid to the other party, and
(c) the FMV of the other (non-like-kind) property you gave up over any liabilities assumed by the other party.
IRS Form 1099-S, Proceeds From Real Estate Transactions
Article: www.teachmepersonalfinance.com/irs-form-1099-s-instructions/
Video: ruclips.net/video/IaBc5bwqnfo/видео.html
Thanks for this video. I have a question. Where do we report the sale proceeds reported on the f1099-S on the property that was given up?
According to the form instructions, if you received cash or other non like-kind property, then you would use Part III to report the transaction and calculate any taxable gain.
Please explain fully difference between Realized gain and Recognized gain. Great video and help for the form filling
Generally speaking, a realized gain is the amount of capital gain that you would realize at the end of a transaction. Recognized gain is the part of realized gain that you pay taxes on.
According to IRS Publication 544, you might need to report recognized gain on either IRS Form 8949, Schedule D, or IRS Form 4797, depending on the circumstances (see links below).
For example, in a like-kind exchange, you would generally only pay tax on the 'boot,' or cash and non-like kind property received, as part of a transaction.
IRS Form 8949, Sales and Dispositions of Capital Assets
Article: www.teachmepersonalfinance.com/irs-form-8949-instructions/
Video: ruclips.net/video/O5P_L9zdXME/видео.html
IRS Schedule D, Capital Gains and Losses
Article: www.teachmepersonalfinance.com/irs-schedule-d-instructions/
Video: ruclips.net/video/wpPXe8z40lY/видео.html
Playlist: ruclips.net/p/PLYHzJrFFCrpx8fntib5MeAQ7xMEfvPVHZ
IRS Form 4797, Sales of Business Property
Article: www.teachmepersonalfinance.com/irs-form-4797-instructions/
Video: ruclips.net/video/2eEaDPh97Zc/видео.html
I have a cash boot. How do I report that?
Cash received from a like-kind exchange goes onto Line 15. From there, you'd complete the rest of the form to determine the taxable amount of any gain.
I have sold 3 rentals to purchase one other. I am not sure how to enter the info
IRS Form 8824 does allow you to report multi-asset exchanges, but you may need to attach your own statement showing how you
figured the realized and recognized gain, and enter the correct amount on lines 19 through 25. Then, you would report any recognized gains on your Schedule D (Form 1040); Form 4797, Sales of Business Property; or Form 6252, Installment Sale Income, whichever applies:
IRS Schedule D, Capital Gains and Losses
Article: www.teachmepersonalfinance.com/irs-schedule-d-instructions/
Video: ruclips.net/video/wpPXe8z40lY/видео.html
Playlist: ruclips.net/p/PLYHzJrFFCrpx8fntib5MeAQ7xMEfvPVHZ
IRS Form 4797, Sales of Business Property
Article: www.teachmepersonalfinance.com/irs-form-4797-instructions/
Video: ruclips.net/video/2eEaDPh97Zc/видео.html
IRS Form 6252, Installment Sale Income
Article: www.teachmepersonalfinance.com/irs-form-6252-instructions/
Video: ruclips.net/video/PAeflip0oFk/видео.html
In this situation, you might consider hiring a tax professional to help you complete your tax return.
Needed this!
Please feel free to check out our article, where we've written step by step instructions to help you walk through this tax form! www.teachmepersonalfinance.com/irs-form-8824-instructions/
If you’re looking for tutorials for other IRS Forms that you can file directly through the IRS website, check out our free fillable forms page: www.teachmepersonalfinance.com/free-fillable-tax-forms/