What is Form 8824?
Form 8824, Like-Kind Exchanges is an Internal Revenue Service (IRS) form used to report an exchange of real property for real property of a like-kind, and to calculate how much of the gain is being deferred, the basis in the acquired property, and the taxable gain to be reported in the current year.
You may make a capital gain if you sell an item for a higher price than you paid for it. You may incur a capital loss when you sell something for less than you paid for it. If you buy an identical property to replace the one you sold right away, the tax code refers to this as a “like-kind exchange.”
IRS Form 8824 is used for like-kind exchanges. A like-kind exchange permits you to delay some or all tax returns. When completing the form, it’s important to keep the following in mind:
- Part I of the form is where you give information about the old and new properties.
- Part II of the form comes into play only when a like-kind exchange involves “related parties”—family members or entities in whom you have a controlling interest.
- Part III is for reporting details about any gains or losses from the transactions that make up the exchange—this is how the IRS keeps track of your taxable gain or tax-deductible loss.
- Part IV of the form, which only certain federal employees can fill up, deals with conflict-of-interest rules.
How to fill out Form 8824?
Filling out the IRS 8824 form is quick and simple. You can electronically fill it out and download it as PDF using PDFRun. By following the instructions below, you can accomplish the form in minutes.
Name(s) shown on tax return
Enter the name(s) shown on your tax return.
Enter your identifying number.
Part I – Information on the Like-Kind Exchange
Lines 1 and 2
For real property, enter the address and type of property. For property that is treated as real property for like-kind exchange purposes, but does not have an address, enter a short description. If the property described is real or personal property located outside the United States, indicate the country.
Enter the date the like-kind property given up was originally acquired using this format: Month, Day, Year.
Enter the date you actually transferred your property to the other party using this format: Month, Day, Year.
Enter the date of the written identification of the like-kind property you received in a deferred exchange. To comply with the 45-day written identification requirement, the following conditions must be met.
- The like-kind property you receive in a deferred exchange is designated in writing as replacement property either in a document you signed or in a written agreement signed by all parties to the exchange.
- The document or agreement describes the replacement property in a clear and recognizable manner. Real property should be described using a legal description, street address, or distinguishable name (for example, “Mayfair Apartment Building”).
- No later than 45 days after the date you transferred the property you gave up:
- You send, fax, or hand-deliver the document you signed to the person required to transfer the replacement property to you (including a disqualified person) or to another person involved in the exchange (other than a disqualified person); or
- All parties to the exchange sign the written agreement designating the replacement property.
If you received the replacement property before the end of the 45-day period, you are automatically treated as having met the 45-day written identification requirement. In this case, enter the date you received the replacement property.
Enter the date you received the like-kind property from the other party using this format: Month, Day, Year. The property must be received by the earlier of the following dates:
- The 180th day after the date you transferred the property given up in the exchange.
- The due date (including extensions) of your tax return for the year in which you transferred the property given up.
Mark the appropriate box if the exchange of the property given up or received was made with a related party, either directly or indirectly (such as through an intermediary). You may select:
If you choose “Yes,” you must complete Part II. Otherwise, proceed to Part III.
Note: Do not file this form if a related party sold property into the exchange, directly or indirectly (such as through an intermediary); that property became your replacement property; and none of the exceptions on line 11 applies to the exchange. Instead, report the disposition of the property as if the exchange had been a sale. If one of the exceptions on line 11 applies to exchange, complete Part II.
Part II – Related Party Exchange Information
Enter the name of the related party, their relationship to you, their identifying number, and their address including their house number, street and apartment, room or suite number, city or town, state, and ZIP code.
Mark the appropriate box if the related party sold or disposed of any part of the like-kind property they received from you in the exchange during this tax year and before the date that is 2 years after the last transfer of property that was part of the exchange. You may select:
Mark the appropriate box if you sold or disposed of any part of the like-kind property you received during this tax year and before the date that is 2 years after the last transfer of property that was part of the exchange. You may select:
Note: If your answers to both lines 9 and 10 are “No” and this is the year of the exchange, proceed to Part III. If both lines 9 and 10 are “No” and this is not the year of the exchange, stop here. If either lines 9 or 10 is “Yes,” complete Part III and report on this year’s tax return the deferred gain or (loss) from line 24 unless one of the exceptions on line 11 applies.
Mark the appropriate box if one of the exceptions below applies to the disposition. You may select:
- The disposition was after the death of either of the related parties.
- The disposition was an involuntary conversion, and the threat of conversion occurred after the exchange.
- You can establish to the satisfaction of the IRS that neither the exchange nor the disposition had tax avoidance as one of its principal purposes. If this box is checked, attach an explanation.
If you believe that you can establish to the satisfaction of the IRS that tax avoidance was not a principal purpose of both the exchange and the disposition, attach an explanation. Generally, tax avoidance won’t be seen as a principal purpose in the case of:
- A disposition of property in a nonrecognition transaction;
- An exchange in which the related parties derive no tax advantage from the shifting of basis between the exchanged properties; or
- An exchange of undivided interests in different properties that results in each related party holding either the entire interest in a single property or a larger undivided interest in any of the properties.
Name(s) shown on tax return
Enter the name(s) shown on your tax return. Leave this space blank if the name(s) were already shown on the other side.
Your social security number
Enter your social security number. Leave this space blank if your SSN was already shown on the other side.
Part III – Realized Gain or (Loss), Recognized Gain, and Basis of Like-Kind Property Received
If you transferred and received (a) more than one group of like-kind properties, or (b) cash or other (not like-kind) property, don’t complete lines 12 through 18 of Form 8824. Instead, attach your own statement showing how you figured the realized and recognized gain, and enter the correct amount on lines 19 through 25. Report any recognized gains on your Schedule D; Form 4797, Sales of Business Property; or Form 6252, Installment Sale Income, whichever applies.
You should complete this line if other property that doesn’t qualify as like-kind property was part of the exchange, in addition to the like-kind property. Enter the fair market value (FMV) of the other property given up.
Enter the adjusted basis of the other property given up.
Enter the gain or (loss) on other property given up. You must report this property on your return. Report gain or (loss) as if the exchange were a sale.
Enter the sum of the following:
- Any cash paid to you by the other party;
- The FMV of other (not like-kind) property you received, if any; and
- Net liabilities assumed by the other party—the excess, if any, of liabilities (including mortgages) assumed by the other party over the total of (a) any liabilities you assumed, (b) cash you paid to the other party, and (c) the FMV of the other (not like-kind) property you gave up.
Reduce the sum of the above amounts (but not below zero) by any exchange expenses you incurred.
The following rules apply in determining the amount of liability treated as assumed.
- A recourse liability (or portion thereof) is treated as assumed by the party receiving the property if that party has agreed to and is expected to satisfy the liability (or portion thereof). It doesn’t matter whether the party transferring the property has been relieved of the liability.
- A nonrecourse liability is generally treated as assumed by the party receiving the property subject to the liability. However, if an owner of other assets subject to the same liability agrees with the party receiving the property to, and is expected to, satisfy part or all of the liability, the amount treated as assumed is reduced by the smaller of (a) the amount of the liability that the owner of the other assets has agreed to and is expected to satisfy, or (b) the FMV of those other assets.
Enter the fair market value (FMV) of the like-kind property you received.
Add lines 15 and 16. Then, enter the sum.
Enter the sum of the following:
- 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 (not like-kind) property you gave up over any liabilities assumed by the other party.
Subtract line 18 from line 17. Then, enter the difference.
Enter the smaller of line 15 or line 19, but not less than zero.
If you disposed of section 1245, 1250, 1252, 1254, or 1255 property (see the instructions for Part III of Form 4797, Sales of Business Property), you may be required to recapture as ordinary income part or all of the realized gain (line 19). Figure the amount to enter on line 21 as follows.
- Section 1245 property. Enter the smaller of:
- The total adjustments for deductions (whether for the same or other property) allowed or allowable to you or any other person for depreciation or amortization (up to the amount of gain shown on line 19); or
- The gain shown on line 20, if any, plus the FMV of non-section 1245 like-kind property received.
- Section 1250 property. Enter the smaller of:
- The gain you would have had to report as ordinary income because of additional depreciation if you had sold the property (see Form 4797, Sales of Business Property, instructions for line 26); or
- The larger of:
- The gain shown on line 20, if any; or
- The excess, if any, of the gain in item (1) above over the FMV of the section 1250 property received.
- Section 1252, 1254, and 1255 property. The rules for these types of property are similar to those for section 1245 property. If the installment method applies to this exchange:
- See section 453(f)(6) to determine the installment sale income taxable for this year and report it on Form 6252, Installment Sale Income;
- Enter on Form 6252, Installment Sale Income, line 25 or 36, the section 1252, 1254, or 1255 recapture amount you figured on Form 8824, line 21—don’t enter more than the amount shown on Form 6252, Installment Sale Income, line 24 or 35;
- Also enter this amount on Form 4797, Sales of Business Property, line 15; and
- If all the ordinary income isn’t recaptured this year, report in future years on Form 6252, Installment Sale Income, the ordinary income up to the taxable installment sale income, until it is all reported.
Subtract line 21 from line 20. Then, enter the difference. If zero or less, enter -0-. If more than zero, enter here and on Schedule D or Form 4797, Sales of Business Property, unless installment method applies.
Report gain from the exchange of property used in a trade or business (and other non capital assets) on Form 4797, Sales of Business Property, line 5 or line 16. Report gain from the exchange of capital assets according to the Schedule D instructions for your return. Be sure to use the date of the exchange as the date for reporting the gain. If the installment method applies to this exchange, see section 453(f)(6) to determine the installment sale income taxable for this year and report it on Form 6252, Installment Sale Income.
Add lines 21 and 22. Then, enter the sum.
If line 19 is a loss, enter the amount here. Otherwise, subtract line 23 from line 19 and enter the difference.
For exchanges with related parties, special rules apply, either directly or indirectly.
An exchange made indirectly with a related party includes:
- An exchange made with a related party through an intermediary (such as a QI or an EAT, as defined in Pub. 544); or
- An exchange made by a disregarded entity (such as a single-member limited liability company) if you or a related party owned that entity.
An exchange structured to avoid the related party rules isn’t a like-kind exchange. Don’t report it on Form 8824. Instead, you should report the disposition of the property given up as if the exchange had been a sale. Such an exchange includes the transfer of property you gave up to a QI in exchange for property you received that was formerly owned by a related party if the related party received cash or other (not like-kind) property for the property you received, and you used the QI intermediary to avoid the application of the related party rules.
If you or the related party (either directly or indirectly) dispose of property received in an exchange before the date that is 2 years after the last transfer that was part of the exchange, the deferred gain or (loss) from this line must be reported on your return for the year of disposition (unless an exception on line 11 applies).
Subtract line 15 from the sum of lines 18 and 23. Then, enter the difference.
The amount stated here is your basis in the like-kind property you received in the exchange. Your basis in other property (not like-kind) received in the exchange, if any, is its fair market value (FMV). If you received section 1245 property or intangible property that is like-kind property in the exchange, the amount stated here must be allocated to each like-kind section 1250 property, like-kind section 1245 property, and like-kind intangible property received in the exchange in proportion to their fair market values.
Part IV – Deferral of Gain From Section 1043 Conflict-of-Interest Sales
Note: This part is to be used only by officers or employees of the executive branch of the federal government or judicial officers of the federal government (including certain spouses, minor or dependent children, and trustees as described in section 1043) for reporting nonrecognition of gain under section 1043 on the sale of property to comply with the conflict-of-interest requirements. This part can be used only if the cost of the replacement property is more than the basis of the divested property.
Complete Part IV of Form 8824 only if the cost of the replacement property is more than the basis of the divested property and you elect to defer the gain. Otherwise, report the sale on your Schedule D or Form 4797, Sales of Business Property, whichever applies.
Enter the number from the upper right corner of your certificate of divestiture. Do not attach a copy of your certificate. Keep the certificate with your records.
Enter the description of your divested property.
Enter the description of your replacement property.
Enter the date the divested property was sold using this format: Month, Day, Year.
Enter the amount you received from the sale of the divested property, minus any selling expenses.
Enter the basis of your divested property.
Subtract line 31 from line 30. Then, enter the difference.
Enter the cost of the replacement property you purchased within 60 days after the date of sale.
Subtract line 33 from line 30. Then, enter the difference. If zero or less, enter -0-.
Follow these steps to determine the amount to enter.
- Use Part III of Form 4797, Sales of Business Property, as a worksheet to figure ordinary income under the recapture rules.
- Enter on Form 8824, line 35, the amount from Form 4797, Sales of Business Property, line 31. Don’t attach the Form 4797 used as a worksheet to your return.
- Report the amount from line 35 on Form 4797, Sales of Business Property, line 10, column (g). In column (a), enter “From Form 8824, line 35.” Don’t complete columns (b) through (f).
Subtract line 35 from line 34. Then, enter the difference.
If you sold a capital asset, enter any capital gain from this line on your Schedule D. If you sold property used in a trade or business (or any other asset for which the gain is treated as ordinary income), report the gain on Form 4797, Sales of Business Property, line 2 or line 10, column (g). In column (a), write “From Form 8824, line 36.” Don’t complete columns (b) through (f). If you held a qualified investment in a Qualified Opportunity Fund (QOF) at any time during the year, you must file your return with Form 8997, Initial and Annual Statement of QOF Investments, attached.
Subtract the sum of lines 35 and 36 from line 32. Then, enter the difference.
Subtract line 37 from line 33. Then, enter the difference.