Discussion:Like-Kind Exchange
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Discussion Forum Index --> Advanced Tax Questions --> Like-Kind Exchange
Discussion Forum Index --> Tax Questions --> Like-Kind Exchange
| 10 April 2008 | |
| The client sold the relinquished property for $ 890,000 at a profit of 75,000 after depreciation recapture
Bought the replacement property for 580,000. Line 25 of for 8824 (basis of like-kind property received ) comes to $802,000 I feel the basis of the replacement property should be (580000 – 75000) 505,000 I do not know how I should proceed with this tax return Any help is highly appreciated | |
| 10 April 2008 | |
| Ramaa:
Please fill out your profile so we know what level of experience you have. thanks | |
| 10 April 2008 | |
| I am an enrolled Agent. I have done tax returns for clients who have bought the multiple replacement property for FMV more than the FMV of property given up. I never faced this kind of problem. Thanks | |
RoyDaleOne (talk|edits) said: | 10 April 2008 |
| Well, I have never seen a like-kind exchange when the selling price is $890,000 and the replacement property is $580,000, coupled with a gain of $75,000. that would not result in 100% of the gain being taxed. Also, the same if $802,000 is the number for the replacement property. 100% of the selling peice must be reinvested to avoid any gain. | |
| 10 April 2008 | |
| Is there any publication or code section I can show it to the client. Thanks a lot | |
RoyDaleOne (talk|edits) said: | 10 April 2008 |
| http://www.havenexchange.com/1031basics.htm | |
| 10 April 2008 | |
| Ramaa-da-ma-Do ....you will have to give the Board better figures (more clarity) in method you developed your figures (your totals). Go to the HUD Closing Statement - and re-check your Depreciation Schedules - your math - like "RoyDaleOne" says is not adding up. | |
| 14 April 2008 | |
| I am sorry for not being clear in number and the method of calculation.
Fundamentally for 1031 exchange the general guideline to follow in order for a taxpayer to defer all the taxable gain is "The value of the replacement property must be equal to or greater than the value of the relinquished property." (reference: http://www.1031.org/about1031/faq.htm) which my client did not meet. So he had to recognize the gain. Fortunately he had prior year unallowed passive losses which was used to offset his major part of the gain. I was looking for more authentic source like IRS publication/Code to show my client why he has to recognize the gain. But I was not able to do more research as the client was in a hurry to file and also the time constraint on my part Thank you | |
