Partial 1031 Exchange - how to enter in ProSeries

Forum|Forum|5 years ago
October 15, 2020
5 replies
53 views

I have a client that participated in a like-kind exchange. They used an intermediary party. The purchased property ($240K) was less than the FMV of the relinquished property ($550K). The basis on the relinquished property ($165K) would reduce the taxable gain. They only received the funds for the difference between the gain ($550K-$165K) - $240K. The cash received was $145K. Please coach me on how to enter this in ProSeries. The 8824 wants to treat the $165K basis plus cash received $145K as boot. Please coach me on how to enter the partial 1031 exchange. Thank you!

ProSeries Basic

This topic has been closed for replies.

T

TaxGuyBill

@Mel7777 wrote:
They only received the funds for the difference between the gain ($550K-$165K) - $240K. The cash received was $145K.

No, the client received $310k ($550 sold, $240 bought). Some of that may have been forwarded to the mortgage company to pay off the mortgage, but the client received $310.

The program is correct and that is all taxable. There was no point in the client doing the 1031 exchange, and wasting money paying the third-party intermediary.

1031 Exchanges are generally for 'upgrading' to a higher cost property. Going down results in some or all of it being taxable.

Sorry for the bad news.

rbynaker

Level 13

@TaxGuyBill wrote:
No, the client received $310k ($550 sold, $240 bought). Some of that may have been forwarded to the mortgage company to pay off the mortgage, but the client received $310.
The program is correct and that is all taxable. There was no point in the client doing the 1031 exchange, and wasting money paying the third-party intermediary.

In this case they're still deferring $75K of gain ($240 - $165) so there might have been some point in doing a 1031 (but I'd guess that the tax savings were eaten up by the fees!)

Rick

T

TaxGuyBill

I'll have to look through the form again, but I have stuck in my head that the extra cash cancels that out.

Sign up

Login with SSO

Let's get you signed in

Login with SSO