【How-to】How to Fill Out Form 8824

What is Form 8824 like-kind exchange?

Use Parts I, II, and III of Form 8824 to report each exchange of business or investment property for property of a like kind. Certain members of the executive branch of the Federal Government and judicial officers of the Federal Government use Part IV to elect to defer gain on conflict-of-interest sales.

Who should file Form 8824?

If during the current tax year you transferred property to another party in a like-kind exchange, you must file Form 8824 with your tax return for that year. Also file Form 8824 for the 2 years following the year of a related party exchange.

How do I report deferred gain on my taxes?

Your 1031 exchange must be reported by completing Form 8824 and filing it along with your federal income tax return. If you completed more than one exchange, a different form must be completed for each exchange.

How do I enter like-kind in TurboTax?

With your return open in TurboTax, search for like kind (2 words, no dash) and then click the “Jump to” link at the top of your search results. This will take you to Any Other Property Sales? Check the second-to-last box from the bottom for like-kind and section 1031 exchanges and click Continue.

Does TurboTax have Form 8824?

Complete the questions in this section and TurboTax will: Generate form 8824 for your like-kind exchange. Calculate the Deferred Gain. This is presented after you answer the questions for the like-kind exchange.

Is boot taxed as ordinary income?

Any boot received is taxable (to the extent of gain realized on the exchange). This is okay when a seller desires some cash and is willing to pay some taxes. Otherwise, boot should be avoided in order for a 1031 Exchange to be tax free.

How can I avoid paying capital gains tax?

If you hold an investment for more than a year before selling, your profit is typically considered a long-term gain and is taxed at a lower rate. You can minimize or avoid capital gains taxes by investing for the long term, using tax-advantaged retirement plans, and offsetting capital gains with capital losses.

How long can you hold a 1031 exchange?

Again, there is not a tax code mandate of one year, but it may be that the IRS would like to see at least a one-year hold. The only minimum required hold period in section 1031 is a “related party” exchange where the required hold is a minimum of two years.

At what rate is boot taxed?

Capital gain tax on boot can be as high as 20% depending on your income bracket. Factors that can create boot include cash proceeds, mortgage reduction, non-like-kind property, and non-transactions costs such as tenant deposits.

What is boot in a tax free exchange?

The term boot refers to non-like-kind property received in an exchange. Usually boot is in the form of cash, an installment note, debt relief or personal property and is valued to be the “fair market value” of the non-like-kind property received.

What is Boot amount?

For example, if you trade in an old car for a new model and add cash to the deal, the cash you pay is the boot. In order for cash boot to be qualified as nonmonetary, the value of the boot should be 25% or less of the total fair value of the exchange.

When can you not do a 1031 exchange?

The two most common situations we encounter which are ineligible for exchange are the sale of a primary residence and “flippers”. Both are excluded for the same reason: In order to be eligible for a 1031 exchange, the relinquished property must have been held for productive in a trade or business or for investment.

What is the capital gains tax for 2021?

In 2021, individual filers won’t pay any capital gains tax if their total taxable income is $40,400 or less. The rate jumps to 15 percent on capital gains, if their income is $40,401 to $445,850. Above that income level the rate climbs to 20 percent.

Are liabilities boot?

Securities received in a corporate organization are treated as boot. The assumption of liabilities (including the acquisition of property subject to a liability) by a transferee corporation in a corporate organization or reorganization generally is not treated as the receipt of boot by the transferor.

How do I avoid taxes on a 1031 exchange?

To complete a 1031 exchange and avoid taxes completely, you need to spend at least as much on a replacement property as you receive for the original property. If you sell a property for $1 million, you’ll need to spend at least $1 million on the replacement property to defer all taxes.

Can I move into my rental property to avoid capital gains tax?

If you’re facing a large tax bill because of the non-qualifying use portion of your property, you can defer paying taxes by completing a 1031 exchange into another investment property. This permits you to defer recognition of any taxable gain that would trigger depreciation recapture and capital gains taxes.

Can I live in my 1031 exchange property?

Property that you hold primarily for personal use cannot be utilized in a 1031 exchange. The general rule is that you should not be living in any property that you wish to exchange with a 1031 transaction – though there are some exceptions to that rule.