After the real estate transactions in a 1031 exchange have been completed, there is a final step to report the exchange to the IRS so that the deferral is recognized. 1031 like-kind exchange, Form 8824 will need to be prepared and filed with the Internal Revenue Service (IRS).
What is Form 8824?
Titled, “Like-Kind Exchanges (and section 1043 conflict-of-interest sales),” Form 8824 serves two primary purposes:
To allow business owners to report the deferral of gains through Section 1031 exchange, including:
Description of the like-kind property (given up)
Description of the like-kind property (received)
Date the given-up property was originally acquired
Date the received property was actually received
Part one also asks if any like-kind property was either sold to or purchased from a related party. If the answer is yes, then the form’s preparer must complete Part II. If the answer is no, then the preparer may skip Part II and move on to complete Part III.
Part II – Related Party Information
It’s interesting to note, this section does not require any calculations. It simply asks for some basic information about the related party transaction, including:
The related party’s name, address and relationship
Timing of any dispositions (by the related party) of the property received from property owner
Timing of dispositions related to the property acquired
Background on Related Parties
Part II addresses very specific concerns regarding what is known as basis shifting. In these transactions, 1031 Exchange Qualified Intermediary and facilitates 1031 exchanges. Always consult your CPA or tax advisor for advice pertaining to your specific tax situation. For more information, visit www.accruit.com or call (800) 237-1031.