Reporting a 1031 Exchange with Form 8824

Filing form 8824

Form 8824 is a little worksheet that you attach to your tax return to report the 1031 exchange. The 8824 is sort of like the answer to the IRS’s question of "where’s my money?" Because when you sell the relinquished property, the title company, law firm, or closing agent that sells and closes that relinquished property is required to report that sale on a 1099 so the IRS is going to know that you sold your relinquished property and they’re going to be wondering where the money is.

Filing Form 8824

The form 8824 answers that question by saying we sold that relinquished property and here's the replacement property that we purchased, and it gives the IRS all the information they need to know to line up and see how the dots are connected between the sale of the relinquished property and the purchase of the new property.

Sometimes taxpayers that sell say in one year and acquire the replacement property in the subsequent year are uncertain what year they file the 8824. Is it the year from which the sale occurred or is it in the year that the purchase occurred? The answer is you need to file the 8824 for the tax return applicable to the year you sold the relinquished property. The IRS is going to receive that 1099 for the year in which you sold your relinquished property and they're going to be asking where's my money. And the answer will come from the 8824 in the year in which you sold your relinquished property.

  • 1031 Hotline: If you have questions about form 8824, feel free to call me at 612-643-1031.

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