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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

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

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