Instructions For Form 8824 - Like-Kind Exchanges (And Section 1043 Conflict-Of-Interest Sales) - 2017 Page 3

ADVERTISEMENT

An exchange made with a related party
A disposition of property in a
Net amount paid to the other party—the
through an intermediary (such as a
nonrecognition transaction,
excess, if any, of the total of (a) any
qualified intermediary or an exchange
An exchange in which the related
liabilities you assumed, (b) cash you paid
accommodation titleholder, as defined in
parties derive no tax advantage from the
to the other party, and (c) the FMV of the
Pub. 544), or
shifting of basis between the exchanged
other (not like-kind) property you gave up
An exchange made by a disregarded
properties, or
over any liabilities assumed by the other
entity (such as a single member limited
An exchange of undivided interests in
party.
liability company) if you or a related party
different properties that results in each
See Regulations section 1.1031(d)-2
owned that entity.
related party holding either the entire
and the following example for figuring
interest in a single property or a larger
An exchange structured to avoid the
amounts to enter on lines 15 and 18.
undivided interest in any of the properties.
related party rules isn't a like-kind
Example. A owns an apartment house
exchange. Don't report it on Form 8824.
Lines 12, 13, and 14. Line 12 should be
with an FMV of $220,000, an adjusted
Instead, you should report the disposition
completed if other property that doesn't
basis of $100,000, and subject to a
of the property given up as if the exchange
qualify as like-kind property was part of
mortgage of $80,000. B owns an
had been a sale. See section 1031(f)(4).
the exchange, in addition to the like-kind
apartment house with an FMV of
Such an exchange includes the transfer of
property. Enter the fair market value
$250,000, an adjusted basis of $175,000,
property you gave up to a qualified
(FMV) and the adjusted basis of the other
and subject to a mortgage of $150,000.
intermediary in exchange for property you
property on lines 12 and 13, respectively.
A transfers his apartment house to B
received that was formerly owned by a
The gain or (loss) from this property is
and receives in exchange B's apartment
related party if the related party received
figured on line 14 and must be reported on
house plus $40,000 cash. A assumes the
cash or other (not like-kind) property for
your return. Report gain or (loss) as if the
mortgage on the apartment house
the property you received, and you used
exchange were a sale.
received from B, and B assumes the
the qualified intermediary to avoid the
Line 15. Include on line 15 the sum of:
mortgage on the apartment house
application of the related party rules. See
Any cash paid to you by the other party,
received from A.
Rev. Rul. 2002-83 for more details. You
The FMV of other (not like-kind)
can find Rev. Rul. 2002-83 on page 927 of
A enters on line 15 only the $40,000
property you received, if any, and
Internal Revenue Bulletin 2002-49 at
cash received from B. The $80,000 of
Net liabilities assumed by the other
liabilities assumed by B isn't included
party—the excess, if any, of liabilities
because it doesn't exceed the $150,000 of
If, after the exchange, you own
(including mortgages) assumed by the
liabilities A assumed. A enters $170,000
replacement property that a
!
other party over the total of (a) any
on line 18—the $100,000 adjusted basis,
related party sold into the
liabilities you assumed, (b) cash you paid
CAUTION
plus the $70,000 excess of the liabilities A
exchange through an unrelated party such
to the other party, and (c) the FMV of the
assumed over the liabilities assumed by B
as a qualified intermediary, don't report
other (not like-kind) property you gave up.
($150,000 - $80,000).
the transaction on Form 8824 unless one
See the example in the instructions for
B enters $30,000 on line 15—the
of the exceptions on line 11 applies.
line 18.
excess of the $150,000 of liabilities
Instead, report the disposition of the
Reduce the sum of the above amounts
property given up as if the exchange had
assumed by A over the total ($120,000) of
(but not below zero) by any exchange
been a sale.
the $80,000 of liabilities B assumed and
expenses you incurred.
the $40,000 cash B paid. B enters on
If you or the related party (either
line 18 only the adjusted basis of
The following rules apply in
directly or indirectly) dispose of property
$175,000 because the total of the $80,000
determining the amount of liability treated
received in an exchange before the date
of liabilities B assumed and the $40,000
as assumed.
that is 2 years after the last transfer which
cash B paid doesn't exceed the $150,000
A recourse liability (or portion thereof) is
was part of the exchange, the deferred
of liabilities assumed by A.
treated as assumed by the party receiving
gain or (loss) from line 24 must be
the property if that party has agreed to and
Line 21. If you disposed of section 1245,
reported on your return for the year of
is expected to satisfy the liability (or
1250, 1252, 1254, or 1255 property (see
disposition (unless an exception on line 11
portion thereof). It doesn't matter whether
the instructions for Part III of Form 4797),
applies).
the party transferring the property has
you may be required to recapture as
If you are filing this form for 1 of the 2
been relieved of the liability.
ordinary income part or all of the realized
years following the year of the exchange,
A nonrecourse liability generally is
gain (line 19). Figure the amount to enter
complete Parts I and II. If both lines 9 and
treated as assumed by the party receiving
on line 21 as follows:
10 are “No,” stop. You don't have to
the property subject to the liability.
complete Part III.
Section 1245 property. Enter the
However, if an owner of other assets
subject to the same liability agrees with
smaller of:
If either line 9 or line 10 is “Yes,” and an
the party receiving the property to, and is
exception on line 11 applies, check the
1. The total adjustments for
expected to, satisfy part or all of the
applicable box on line 11, attach any
deductions (whether for the same or other
liability, the amount treated as assumed is
required explanation, and stop. If none of
property) allowed or allowable to you or
reduced by the smaller of (a) the amount
the exceptions on line 11 apply, complete
any other person for depreciation or
of the liability that the owner of the other
Part III. Report the deferred gain or (loss)
amortization (up to the amount of gain
assets has agreed to and is expected to
from line 24 on this year's tax return as if
shown on line 19), or
satisfy or (b) the FMV of those other
the exchange had been a sale.
2. The gain shown on line 20, if any,
assets.
plus the FMV of non-section 1245
Line 11c. If you believe that you can
Line 18. Include on line 18 the sum of:
like-kind property received.
establish to the satisfaction of the IRS that
The adjusted basis of the like-kind
tax avoidance was not a principal purpose
Section 1250 property. Enter the
property you gave up,
of both the exchange and the disposition,
smaller of:
Exchange expenses, if any (except for
attach an explanation. Generally, tax
1. The gain you would have had to
expenses used to reduce the amount
avoidance won't be seen as a principal
reported on line 15), and
report as ordinary income because of
purpose in the case of:
2017 Instructions for Form 8824
-3-

ADVERTISEMENT

00 votes

Related Articles

Related forms

Related Categories

Parent category: Financial
Go
Page of 4