Form 8824: Report an Exchange on Your Tax Return
Discover the process of reporting like-kind exchanges on your tax return utilizing Form 8824.
Although a 1031 Exchange offers potential tax savings, it's crucial to report each exchange to the IRS. This ensures that the IRS acknowledges the profits from your relinquished property, indicating that they should be deferred rather than immediately taxed at standard capital gains rates. This deferral occurs as the funds move through a qualified intermediary into the equity share of a newly acquired property.
What Is Form 8824?
The IRS designed Form 8824 to assist real estate investors in reporting their exchanges on their tax returns. According to the IRS, "If you made more than one like-kind exchange, you can file a summary on one Form 8824 and attach your own statement showing all the information requested on Form 8824 for each exchange."
What Should I Report on Form 8824?
When reporting an exchange to the IRS using Form 8824, investors should provide the following details:
• Descriptions of the properties exchanged
• Dates when properties were identified and transferred
• Any relationship between the parties involved in the exchange
• Value of the like-kind and other property received
• Gain or loss on the sale of other (non-like-kind) property relinquished
• Cash received or paid; liabilities relieved or assumed
• Adjusted basis of like-kind property relinquished; realized gain.
Conclusion
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