Level 5

Question

Like Kind Exchange - form 8824

Forum|Forum|3 years ago
January 27, 2023
3 replies
17 views

A new client sold a rental property and did a like kind exchange for a new property- Actually 2 new rental properties .

I have the Form 8824 from the previous tax preparer. The deferred Gain was $1,155,733 (line 24) and the basis of the like kind property received is $898,848.00 (line 25) (Line 19 was 1,329,304 and line 23 was 173,571)

From the instructions for form 8824, line 25 is the basis for the (2) new properties. I

How do I account for the deferred gain of $ 1,155,733 in Lacerte? It is more that the basis on line 25.

Thank you in advance for your help.

Lacerte Tax

This topic has been closed for replies.

sjrcpa

Level 15

The purpose of a like kind exchange is to defer the gain.

You don't account for the deferred gain anywhere. Ir will be realized if and when the propert(ies) are sold.

The more I know the more I don’t know.

J

jlew1229Author

Level 5

I so understand it is a deferred gain. My questions was more on if there was a place to put the fact that the deferred gain is actually more than the basis that was determined on form 8824. For the future when and if the replacement property is sold. The previous accountant did not put an asset on the books. I am assuming because 898,848.00 - 1,155,733 is a negative number.

Other than a note on the inside of the folder. If the client goes to a new tax preparer in the future, how are they to know that what this deferred gain was.

J

jlew1229Author

Level 5

Sorry, I meant I do understand, not so understand.

P

PamC

Level 6

The deferred gain adjusted the basis of the new asset so that it is lower than the actual value. When it is sold the lower basis will mean a larger gain is recognized.

But you may want to check to see if the property given up in the exchange was in a different state than the properties acquired. Due to claw back provisions, many states require an annual filing showing that you haven't sold the new property because when it is sold they are entitled to the tax on the deferred gain.

sjrcpa

Level 15

i.e. California

The more I know the more I don’t know.

T

TaxGuyBill

Level 15

Are you referring to depreciation on the new property?

It depends on if you make the election or not (1.168i-something). One way is that you depreciate the new Basis using the new placed in service date. The other way is that you continue depreciating the old property using the old Basis and old placed in service date, PLUS you depreciate the 'extra' amount for the new property using the new placed in service date.

Sign up

Login with SSO

Let's get you signed in

Login with SSO

Scanning file for viruses.

This file cannot be downloaded