Form 8824

Quick definition

Form 8824 is the IRS form used to report Section 1031 like‑kind exchanges of business or investment real property. In real estate, it documents the swap of one qualifying investment or business property for another so a taxpayer can defer capital gains tax that would otherwise be due on the sale.

What is Form 8824?

Form 8824 records the details of a like‑kind exchange and does three main things: it documents the properties involved (the relinquished and replacement properties), it calculates the deferred gain or loss, and it establishes the basis of the new property. The completed form must be filed with the taxpayer’s federal income tax return for the year in which the relinquished property was transferred.

Key sections of Form 8824

• Part I – General information about the exchange: taxpayer info, dates, and brief descriptions of the properties.
• Part II – Details about the relinquished property (adjusted basis, fair market value, date acquired).
• Part III – Details about the replacement property and the calculations to determine realized and recognized gain or loss and the new property’s basis.
• Part IV – Special rules that apply to certain federal employees for deferring gains in conflict‑of‑interest sales.

How the form works (concepts to know)

• Like‑kind requirement: The exchanged properties must be similar in nature or character and used for business or investment. Primary residences and personal‑use property do not qualify.
• Identification and timing rules: You must identify replacement property within 45 days of transferring the relinquished property and complete the exchange within 180 days.
• Boot: Any cash or non‑like‑kind property received (called "boot") can trigger recognized gain taxable in the year of the exchange.
• Basis determination: Form 8824 shows how much gain is deferred and establishes the adjusted basis of the replacement property for future tax purposes.

Real‑world examples

Example 1 — Simple rental swap with cash: Ingrid owns a rental (Elm Street) FMV $200,000, adjusted basis $110,000. She exchanges it for another rental (Pine Avenue) FMV $150,000. The Pine seller assumes Elm’s $20,000 mortgage and pays Ingrid $10,000 cash. Ingrid files Form 8824 to report the exchange, calculates the realized gain, recognizes the portion attributable to the $10,000 cash (boot), and determines the deferred gain and basis in Pine Avenue.

Example 2 — Apartment building exchange with cash boot: Taylor’s building: FMV $220,000, basis $100,000, mortgage $80,000. Finley’s building: FMV $250,000, basis $175,000, mortgage $150,000. Taylor also receives $40,000 cash. Taylor reports the transaction on Form 8824, shows the realized gain, recognizes taxable gain equal to the cash boot (and any reduction in liabilities), and establishes the new adjusted basis in the acquired building.

Who uses Form 8824?

Primarily investors and businesses that exchange investment or trade real estate (rental, commercial, or other qualifying business property). Homeowners selling a primary residence normally do not use Form 8824 unless the property is held for investment or business purposes and is part of a 1031 exchange.

Filing and compliance tips

• File Form 8824 with your federal tax return for the year the relinquished property was transferred.
• Keep detailed records: closing statements, identification notices, exchange agreements, and any intermediary paperwork used in a delayed exchange.
• Watch the 45‑day identification and 180‑day exchange deadlines—missing them can disqualify the exchange and trigger immediate gain recognition.
• Receiving boot (cash or non‑like‑kind property) usually causes some gain to be recognized; plan accordingly.

Bottom line

Form 8824 is the explicit IRS reporting tool for Section 1031 like‑kind exchanges of business or investment real estate. It ensures the exchange is properly documented, calculates deferred versus recognized gain, and establishes the basis of the replacement property. Because timing rules, liability adjustments, and boot can affect tax outcomes, investors commonly work with qualified intermediaries and tax professionals when completing exchanges and preparing Form 8824.