Like Kind Exchange 1031 Form

Not used for 1031 exchange used only for.

Like kind exchange 1031 form.

Information on the like kind exchange. If you receive cash relief from debt or. As part of a qualifying like kind exchange. 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.

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. The exchange is reported on irs form 8824 like kind exchanges. Realized gain or loss recognized gain and basis of like kind property received part iv. Related party exchange information part iii.

Broadly stated a 1031 exchange also called a like kind exchange or a starker is a swap of one investment property for another. Generally only real property should be described on line 1 or 2. Information on the like kind exchange part ii. 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.

Gain deferred in a like kind exchange under irc section 1031 is tax deferred but it is not tax free. You also must hold both properties for business productive use in a trade or investment 26 u s c. 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. Use parts i ii and iii of form 8824 to report each exchange of business or investment property for property of a like kind.

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. The term 1031 exchange is defined under section 1031 of the irs code. A like kind exchange is used when someone wants to sell an asset and acquire a similar one while avoiding the capital gains tax. Like kind exchanges are heavily monitored by the irs and require.

Generally if you make a like kind exchange you are not required to recognize a gain or loss under internal revenue code section 1031. The form 8824 is divided into four parts. We ll discuss like kind property in more detail in section four. Part iii computes the amount of gain required to be reported on the tax return in the current.

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. What is considered like kind property.