Form 8949: Report Realized Gains from an Exchange

Explore how to utilize Form 8949 for reporting direct profits from a sale involving a 1031 Exchange.

The IRS explains: “If you have any recognized gain because you received money or unlike property, report it on Form 8949, Schedule D (Form 1040), or Form 4797, as applicable.”

What Should I Report in Form 8949?

Form 8949 serves a specific purpose: reporting any gains realized from an exchange. If you've undergone a 1031 Exchange for a set of relinquished/acquired properties and personally experienced profit from the exchange, it's necessary to file Form 8949 to report this recaptured profit to the IRS.

Items to be included on Form 8949:

• Sales or exchanges of capital assets like stocks, bonds, etc., and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). Include these transactions even if you did not receive a Form 1099-B or 1099-S.

• Gains from involuntary conversions (other than from casualty or theft) of capital assets not used in your trade or business.

• Nonbusiness bad debts.

• Worthlessness of a security.

• The election to defer capital gain invested in a qualified opportunity fund (QOF).

• The disposition of interests in QOFs.

What if I File Taxes Jointly with My Spouse?

You have the option to file multiple Form 8949 documents in your tax filings, even if you are filing jointly with your spouse.

The IRS explains: "Individuals filing a joint return should complete as many copies of Form 8949 as necessary to report all transactions for both spouses. Transactions can be listed separately for each spouse or combined on a single form. However, the totals from all Forms 8949 for both spouses must be included on your Schedule D."

However, Form 8949 may be necessary for you and your spouse for reasons other than reporting gains from an exchange. The IRS further explains:

"On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. Neither you nor your spouse can deduct any part of the other’s loss. If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss."