Instructions for Filling Out Form 8824

This document offers comprehensive guidance on completing Form 8824 for the year 2023, covering its purpose, filing deadlines, and a step-by-step walkthrough for each section. Form 8824 is utilized for reporting like-kind exchanges of business or investment real property.

In this article, we'll provide essential information on Form 8824 and a step-by-step guide on how to fill it out accurately and efficiently.

What is Form 8824?

Form 8824 is a document used by the Internal Revenue Service (IRS) to report each exchange of business or investment real property for real property of a like kind. The primary purpose of this form is to calculate the amount of gain deferred as a result of a like-kind exchange and determine the basis of the like-kind property received. It must be filed with the tax return for the year in which the property was transferred, and special rules apply to exchanges made with related parties. Additionally, the form provides instructions for handling exchanges involving multiple assets, deferred exchanges, and exchanges using a Qualified Exchange Accommodation Arrangement (QEAA).

Who Must File Form 8824?

Form 8824 must be filed by taxpayers who have engaged in a like-kind exchange of business or investment real property during the tax year. This form is used to report the details of the exchange, calculate the amount of gain deferred, and determine the basis of the like-kind property received. If you have participated in such an exchange, it is essential to file Form 8824 with your tax return for the year in which the property was transferred.

Form 8824 Tax Filing Deadlines and Due Dates

• Form 8824 must be filed with the tax return for the year in which the property was transferred.
• The form must be filed for the two years following the year of a related party exchange.

Form 8824 Late Payment Penalty

Although there’s not a specific late payment penalty amount for Form 8824, it is important to file the form on time with your tax return to avoid potential penalties. Late filing or payment penalties may apply to your overall tax return if you fail to file or pay on time, and Form 8824 is a required part of your return if you have engaged in a like-kind exchange during the tax year. To ensure compliance and avoid penalties, always file Form 8824 and your tax return by the appropriate deadline.

Step-by-Step Instructions for Form 8824

The step-by-step instructions for filling out Form 8824 are as follows:

1. Enter the description of the property given up and received in the exchange on lines 1 and 2.
2. Enter the date of the written identification of the like-kind property received in a deferred exchange on line 5.
3. Enter the date the like-kind property was received from the other party on line 6.
4. If the exchange was made with a related party, complete line 7.
5. Enter the fair market value (FMV) of the like-kind property received and any other property received on lines 15 and 16.
6. Calculate the realized gain or loss on line 19.
7. Calculate the recognized gain on line 20.
8. Calculate the deferred gain or loss on line 24.
9. Calculate the basis of the like-kind property received on line 25.
10. If the exchange involved section 1245, 1250, 1252, 1254, or 1255 property, calculate the amount of ordinary income to be recaptured on line 21.
11. If the exchange involved a conflict-of-interest sale, complete Part IV of the form.

How to Submit Form 8824

To submit Form 8824, first fill out the form according to the provided instructions. If you transferred property to another party in a like-kind exchange during the current tax year, file Form 8824 with your tax return for that year. Additionally, file Form 8824 for the two years following the year of a related party exchange.

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