Like Kind Exchange 1031 Form

Gain deferred in a like kind exchange under irc section 1031 is tax deferred but it is not tax free.

Like kind exchange 1031 form.

A like kind exchange is used when someone wants to sell an asset and acquire a similar one while avoiding the capital gains tax. 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. Broadly stated a 1031 exchange also called a like kind exchange or a starker is a swap of one investment property for another. 1 to put it simply this strategy allows an investor to defer paying capital gains taxes on an investment property when it is sold as long another like kind property is purchased with the profit gained by the sale of the first property.

What is considered like kind property. Like kind exchanges when you exchange real property used for business or held as an investment solely for other business or investment property that is the same type or like kind have long been permitted under the internal revenue code. Information on the like kind exchange. Information on the like kind exchange part ii.

Use parts i ii and iii of form 8824 to report each exchange of business or investment property for property of a like kind. Generally only real property should be described on line 1 or 2. Related party exchange information part iii. However you may describe personal and or real property on line 1 or 2 if you are filing this form to report the disposition of property exchanged in a previously reported related party like kind exchange.

You also must hold both properties for business productive use in a trade or investment 26 u s c. Not used for 1031 exchange used only for. The exchange is reported on irs form 8824 like kind exchanges. To defer paying capital gains taxes using a 1031 like kind exchange your replacement property must be of the same kind as the property sold.

Generally if you make a like kind exchange you are not required to recognize a gain or loss under internal revenue code section 1031. Like kind exchanges are heavily monitored by the irs and require. Realized gain or loss recognized gain and basis of like kind property received part iv. We ll discuss like kind property in more detail in section four.

Form 8824 figures the amount of gain deferred as a result of a like kind exchange. The exchange can include like kind property exclusively or it can include like kind property along with cash liabilities and property that are not like kind. Although most swaps are taxable as sales if yours meets the. If you receive cash relief from debt or.

Use parts i ii and iii of form 8824 to report each exchange of business or investment real property for real property of a like kind. The form 8824 is divided into four parts.