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

Partial 1031 Exchange - how to enter in ProSeries

Highlighted
Level 1

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!

Labels (1)
0 Cheers
5 Replies 5
Highlighted
Level 12

@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.

Highlighted
Level 10

@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

0 Cheers
Highlighted
Level 12

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

0 Cheers
Highlighted
Level 10

@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.


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.

0 Cheers
Highlighted
Level 12

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

0 Cheers