Like-Kind Exchanges -Form 8824

 

In a like-kind exchange, you might exchange real 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.

What is Considered a Like-Kind Exchange?

Properties in a like-kind exchange can differ in grade or quality. However, to be considered a like-kind exchange, the property must be:

like kind exchange

  • In the same general asset class
  • Similar in nature
  • Similar in character
  • Not held for resale or flipped

Example of a Like-Kind Exchange:

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.

What Rules Apply to Like-Kind Exchanges?

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.

Fill Our IRS Form 8824

You should prepare IRS Form 8824: Like-Kind Exchanges for all like-kind exchanges.

Special rules apply for:

  • Multi-assets
  • 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—Like-kind exchanges must be for business and investment real property. I could find nothing in the instructions related to property received that will be treated as a home.

More Help Completing Tax Forms

To learn more about reporting the exchange, see Form 8824 instructions at www.irs.gov. To get hands-on guidance with filling out Form 8824, get the help of tax pros at H&R Block.

Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you out.

Related Topics

Related Resources

Collection Information Statement

Learn about IRS collection information statements, which the IRS uses to determine your ability to pay for certain tax payment agreements.

Reporting Form 1099-R Amounts As Income

Do you have to report amounts from Form 1099-R as income on your taxes? Learn more from the tax experts at H&R Block.

Claim for Refund

Learn about an IRS claim for refund (Form 843). Read the IRS definition and get more insight from the experts at H&R Block.

IRS Letter 5037 – Second Notice

Learn more about IRS Letter 5037 and how to handle an inquiry of your business' income with help from the tax experts at H&R Block.