Partial 1031 Exchange - how to enter in ProSeries

[Mel7777]

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!

[TaxGuyBill]

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@Mel7777 wrote:

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

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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]

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@TaxGuyBill wrote:

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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

[TaxGuyBill]

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

[rbynaker]

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@TaxGuyBill wrote:

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

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In this case the gain is $550 - $165 = $385.  Boot received was only $310 so that's how much gain gets recognized.  The right answer is probably something completely different but I'm ignoring facts not in evidence such as closing costs and prior depreciation.

[TaxGuyBill]

That makes sense.  But the OP is still stuck with figuring out how to enter it in ProSeries.