Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

How do I enter a like-kind exchange in the depreciation screen?

Highlighted
Intuit

How do I enter a like-kind exchange in the depreciation screen?

Form 8824 for like-kind exchanges (also known as section 1031 exchanges) can be generated from the Depreciation screen or from the Schedule D/4797/etc. screen in ProConnect Tax Online. These steps will walk you through the input in the Depreciation screen, including instructions on creating new assets. If the like-kind assets are not being depreciated, follow the instructions in How do I enter a like kind exchange in the Schedule D screen? instead.

Where to find the depreciation screen in each return type:

  • Individual: Deductions > Depreciation
  • Partnership: Ordinary Income > Depreciation (4562)
  • S-Corporate: Ordinary Income > Depreciation (4562)
  • Corporate: Deductions > Depreciation
  • Fiduciary: Deductions > Depreciation
  • Exempt organization: Expenses > Depreciation

Follow these steps to generate Form 8824 from the Depreciation screen:

  1. Go to the Depreciation screen.
  2. In the Quick Entry grid, locate the asset that was given up in a like-kind exchange.
  3. Click the Details button.
  4. On the left-side navigation menu, select General Disposition Information.
  5. Enter the Date sold, disposed, or retired (MANDATORY).
  6. Enter any Expenses of sale or exchange incurred.
  7. On the left-side navigation menu, select Like-Kind Exchanges (8824).
  8. In the Property Received section, enter a Description, Date property identified, Date property received, and FMV of like-kind property.
  9. Enter any Cash and Loan Amounts or Other Property Given (not like-kind) if applicable.

Click on the method you would like to use to create new assets below to continue.

With the simplified method, no asset tracking or linking is required. No carryover basis or boot assets are created, because you are allowed to create and depreciate the new asset based solely on the calculated basis of the property you received (Form 8824, line 25). It's one asset out/one asset in bookkeeping. The election to use the simplified method does not affect Form 8824; it only affects how new assets are set up to account for the property received. See Regulation 1.168(i)-6 for details.

  1. Check the box Simplified method - elect to not create carryover basis assets.
  2. Enter the Election Information. An election statement will print with the return and be attached to the e-file.
  3. Go to the Check Return tab.
  4. Verify that Form 8824 is generating correctly.
  5. Click on Suggestions on the left side of your screen.
  6. Look for a suggestion beginning with "Depreciation asset: The election to not apply...".
    • The suggestion will recommend the basis amount and date placed in service to use for the new asset acquired in the exchange.
  7. Go back to the Input Return tab.
  8. Locate the Depreciation screen.
  9. Enter the new asset acquired, using the amounts from step 15.

When you choose not to elect the simplified method, IRS regulations require you to track two components of the asset received: carryover basis, and boot. The adjusted basis of both of these components sums to equal the full basis of the property received (Form 8824, line 25).

Carryover Basis

For MACRS properties given up in a like-exchange, ProConnect Tax Online will automatically create a carryover basis asset for depreciation purposes. The carryover basis is defined as the lesser of the adjusted basis of the property given up or the basis in the property received. For the depreciation calculation in the year of exchange, the program will add-back the amount of depreciation claimed on the property given. If the basis of the property received should be used, a Suggestion will generate specifying that an override should be entered in Carryover basis [Override]. A Suggestion will generate indicating that a carryover basis asset was created.

Boot

The boot, also called incremental investment or excess basis, refers to the basis of property received that exceeds the carryover basis. Not all like-kind exchanges will involve excess basis. ProConnect Tax Online will generate a Suggestion recommending the basis amount and date placed in service to use for the boot, and how to link the boot asset to the carryover basis asset for tracking in future years.

  1. Go to the Check Return tab.
  2. Verify that Form 8824 is generating correctly.
  3. Click on Curr Year Depr (Regular) on the left side of your screen to view the depreciation schedule.
  4. Verify that the carryover basis asset appears. (By default, the program will name the carryover asset "Description of property received - C/O Basis", although the description may be cut off due to a character limit.)
  5. Click on Suggestions on the left side of your screen.
  6. Follow the instructions in the Suggestions to enter the boot as a new asset on the Depreciation screen (if applicable).

Related Topics

How do I enter a like kind exchange in the Schedule D screen?
Generating or Suppressing Linked Asset Depreciation Schedule
2018 Individual and Business Tax Reform - Summary of Changes
Entering a Bulk Sale
Entering a Sale or Disposition of Assets

Was this helpful?

You must sign in to vote, reply, or post
Labels (1)