Internal Revenue Service (IRS) Form 8824 is used by the individual, corporate, resident and non-resident taxpayer to report their 1031 like-kind exchange. A 1031 like-kind exchange is a tax strategy that allows the taxpayer to defer indefinitely the federal and state capital gain tax triggered by the sale of real property held for productive use in a trade, business or for investment when replaced with like-kind property within 180 calendar days of the initial transaction. In exchanges of US real estate, a 1099 is generated by the closing company with a copy forwarded to the IRS and to the taxpayer. It is the responsibility of the taxpayer to itemize the 1031 exchange when filing their federal tax return to report the exchange proceeds were used towards the acquisition of replacement property in a like-kind exchange.
Form 8824
The four part form 8824 asks a series of questions including descriptions of the property sold and acquired, the 45th calendar day the replacement property was identified and received, related party, realized and recognized gain and basis of like-kind property received. The first three parts are typically completed while part four is to be completed by officers or employees of the executive branch of the federal government.
The related party questions are looking for those 1031 exchanges where a related party was involved in purchasing or selling their property to the taxpayer. A related party is a grandparent, parent, child, sibling, trust or entity where the taxpayer owns fifty percent or more. In-laws are not considered a related party. Should the related party who acquired the old property from the taxpayer sell the property within two years of the 1031 exchange, the tax deferred in the 1031 exchange is triggered.
The qualified intermediary who accommodated the 1031 exchange is to be identified, including their tax identification number, per question seven and nine.
If multiple exchanges are completed, the IRS instructs filers to include a summary page along with responses to form 8824 for each exchange. The 8824 forms are filed in the year the relinquished property title is conveyed.
IRS Form 8824 Reporting
Reverse 1031 Exchange
In a reverse 1031 exchange, when the replacement property is acquired before the sale of the old property, there is a parking arrangement known as a Qualified Exchange Accommodation Agreement with the Exchange Accommodation Titleholder or EAT and a simultaneous exchange agreement. The simultaneous exchange agreement is completed in the first leg when the EAT receives title to the old property before the new property is acquired by the taxpayer, or in the second leg when the old property is sold and the replacement property title is conveyed from the EAT to the taxpayer.
In an exchange last where the replacement property is parked with the EAT, the date used is when the taxpayer conveys the relinquished property title to the buyer and the EAT conveys the replacement property title to the taxpayer. In an exchange first, the date used to answer question four is when the relinquished property title is conveyed to the EAT and the taxpayer acquires the replacement property from the seller. Typically, the date the title is conveyed to the EAT is the same day as the replacement or relinquished property found on the settlement statement.
Forward 1031 Exchange
In a forward 1031 exchange, the relinquished property is sold prior to acquiring the replacement property. The date to use in question four is when the relinquished property title was conveyed. Question six asks the date the replacement property was received or the date found on the replacement property settlement statement.
The IRS provides a publication that discusses each question on Form 8824.
We Can Help
Atlas 1031 Exchange has been accommodating tax-deferred exchanges of all kinds for more than 17 years. We are fluent in the rules and regulations of IRC Section 1031 and able to help you navigate your exchange.
Contact us today to discuss any questions you may have. Call our office at 1-800-227-1031, email us at info@atlas1031.com, or submit your question through the online form at the top of this page.
