In 1033 exchange due involuntary takeover of property by state, how do I show deferred gain in 1065? Thru form 8824 or some other way?

[Abhay Bhargava]

Client surrendered property to State due to involuntary takeover by State of a hotel to expand roadway in April 2024. Client intends to do 1033 exchange which gives him 2 years to buy another property. Since there is no new property identified/purchased by the end of 2024, how should deferment of taxes takes place. Is it still thru from 8824?

[George4Tacks]

https://accountants.intuit.com/support/en-us/help-article/federal-taxes/entering-1033-election-invol...

How do I enter a Condemnation of Property?

To report the deferment of the gain on Form 4797 under Section 1033:

Individual

1. Go to Screen 17, Dispositions.
2. Enter the Description, Date acquired, Date sold, Sales price (if any) and Cost or basis.
3. Scroll down to the Form 4797 section.
4. Enter the appropriate amount or a -1 in Depreciation allowed (-1 = none, triggers 4797).
5. Scroll down to the Overrides section.
6. Enter a -1 in Total gain (loss) [O].
7. Go to Screen 46, Elections.
8. Click on Election 1 from the top left navigation panel, or click on Add.
9. Scroll down to the Other Election section.
10. Hold down Ctrl+E in Election title and enter the applicable information.
11. Click OK.
12. Hold down Ctrl+E in Election text to enter the applicable information. (See the Election Text section below for more information.)
13. Click OK.

[Abhay Bhargava]

Hello George4Tacks

Thanks for your answer.

We use Proseries and have further questions.  The instructions you gave are for Proseries or other software?  Also it says individual. Bit confused -  I am working on 1065 so can you please clarify when you say screen 17 - what is it?

Thanks

[sjrcpa]

Your question appears in Lacerte Tax so George gave Lacerte instructions.

[Abhay Bhargava]

I asked question within Proseries software so not sure why it appears in Lacerte.

However, can you give general instruction - nothing specific to software as to where in 1065 one would defer gain since replacement property is not purchased yet as taxpayer has two years to get it and at the end of 2024 he doesn't know who property?

Thanks

[George4Tacks]

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/1033-condemnation-exch... for some info

If you decide to show the sale look at the Lacerte answer given for guidelines.

Enter the sale as a 4797 sale 

Enter the election (I found it here for ProSeries https://accountants.intuit.com/support/en-us/help-article/partnership/reporting-irc-elections-proser... )

[Abhay Bhargava]

Hi

Read various notes and looks like in 1033 exchange, all goes on 4797.  For 2024 return it's negative amount on Line 5 and negative amount on line 16.  In accounting I debited gain and created a reserve in books so books match return.

Thanks for your help !!

Take Care