Like-Kind Exchanges -Form 8824
In a like-kind exchange, you might exchange property for similar property used solely for business or investment. If so, you might completely or partially defer gain on the exchange. If your gain is tax-deferred, you won’t recognize gain and pay tax until you dispose of the new property.
Properties in a like-kind exchange can differ in grade or quality. However, to be considered a like-kind exchange, the property must be:
- In the same general asset class
- Similar in nature
- Similar in character
Ex: You might give up a rental home in need of repairs in exchange for another rental home that’s well-maintained. If so, it’s a like-kind exchange.
To learn more, see Publication 544: Sales and Other Dispositions of Assets at www.irs.gov.
You don’t have to receive property on the day you give up your property for it to be a like-kind exchange. However, strict rules apply to tax-deferred exchanges. You might want a deferred exchange to qualify as a like-kind exchange. If so, you must comply with the 45-day written notice. The notice identifies the property you and the other person will exchange.
You must receive the replacement property by the earlier of these:
- 180 days after you gave up your property (not six months, but exactly 180 days)
- The due date of your federal return for the year you transferred your property. This includes any extensions.
You must prepare Form 8824: Like-Kind Exchanges for all like-kind exchanges.
Special rules apply for:
- Multi-asset exchanges made with someone you’re related to
- Property you once used as your personal residence
- Property you received that will become your personal residence
To learn more about reporting the exchange, see Form 8824 instructions at www.irs.gov.
Learn about IRS Notice CP297C, your appeal rights, and how to handle an IRS tax bill. Get tax help from the tax experts at H&R Block.
Learn more about IRS Letter 4552C and how to handle an inquiry of your business' income with help from the tax experts at H&R Block.
Learn about IRS Notice CP298 and how to address an IRS bill for unpaid taxes. Get help from the tax experts at H&R Block.
The IRS won't open an audit simply because you file an amended return. But, there are things you should know about filing Form 1040X.