U.S. Individual Income Tax Return

2011

Instructions for Form 8824

Department of the Treasury
Internal Revenue Service

Like-Kind Exchanges
(and section 1043 conflict-of-interest sales)
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
Purpose of Form
Use Parts I, II, and III of Form 8824 to
report each exchange of business or
investment property for property of a like
kind. Certain members of the executive
branch of the Federal Government and
judicial officers of the Federal
Government use Part IV to elect to defer
gain on conflict-of-interest sales. Judicial
officers of the Federal Government are
the following:
1. Chief Justice of the United States.
2. Associate Justices of the Supreme
Court.
3. Judges of the:
a. United States courts of appeals,
b. United States district courts,
including the district courts in Guam, the
Northern Mariana Islands, and the Virgin
Islands,
c. Court of Appeals for the Federal
Circuit,
d. Court of International Trade,
e. Tax Court,
f. Court of Federal Claims,
g. Court of Appeals for Veterans
Claims,
h. United States Court of Appeals for
the Armed Forces, and
i. Any court created by Act of
Congress, the judges of which are entitled
to hold office during good behavior.
Multiple exchanges. If you made more
than one like-kind exchange, you can file
only a summary Form 8824 and attach
your own statement showing all the
information requested on Form 8824 for
each exchange. Include your name and
identifying number at the top of each
page of the statement. On the summary
Form 8824, enter only your name and
identifying number, “Summary” on line 1,
the total recognized gain from all
exchanges on line 23, and the total basis
of all like-kind property received on line
25.
How to get the latest information. For
the latest information about this form and
its instructions, go to www.irs.gov/
form8824.

When To File
If during the current tax year you
transferred property to another party in a
like-kind exchange, you must file Form
Sep 28, 2011

8824 with your tax return for that year.
Also file Form 8824 for the 2 years
following the year of a related party
exchange (see the instructions for line 7).

Like-Kind Exchanges
Generally, if you exchange business or
investment property solely for business or
investment property of a like kind, section
1031 provides that no gain or loss is
recognized. If, as part of the exchange,
you also receive other (not like-kind)
property or money, gain is recognized to
the extent of the other property and
money received, but a loss is not
recognized.
Section 1031 does not apply to
exchanges of inventory, stocks, bonds,
notes, other securities or evidence of
indebtedness, or certain other assets.
See section 1031(a)(2). In addition,
section 1031 does not apply to certain
exchanges involving tax-exempt use
property subject to a lease. See section
470(e)(4).
If you exchanged stock in a
TIP mutual ditch, reservoir, or
irrigation company, see the
discussion later.
Like-kind property. Properties are of
like kind if they are of the same nature or
character, even if they differ in grade or
quality. Personal properties of a like class
are like-kind properties. However,
livestock of different sexes are not
like-kind properties. Also, personal
property used predominantly in the United
States and personal property used
predominantly outside the United States
are not like-kind properties. See Pub.
544, Sales and Other Dispositions of
Assets, for more details.
Real properties generally are of like
kind, regardless of whether they are
improved or unimproved. However, real
property in the United States and real
property outside the United States are not
like-kind properties.
Deferred exchanges. A deferred
exchange occurs when the property
received in the exchange is received after
the transfer of the property given up. For
a deferred exchange to qualify as
like-kind, you must comply with the timing
requirements for identification and receipt
of replacement property explained in the
instructions for line 5 and line 6.
If you make a deferred exchange using
a qualified intermediary (QI), the transfer
of the property given up and receipt of
like-kind property is treated as a like-kind
Cat. No. 12597K

exchange. If you fail to meet the timing
requirements because of the QI, your
transaction will not qualify as a deferred
exchange and any gain may be taxable in
the year you transferred the property.
However, if the QI defaults on its
obligation to acquire and transfer
replacement property because of
bankruptcy or receivership proceedings
and you meet certain requirements, you
may be able to report the gain in the year
or years payments are received. For the
requirements, see Rev. Proc. 2010-14,
2010-12 I.R.B. 456, available at www.irs.
gov/irb/2010-12_IRB/ar07.html.
Multi-asset exchanges. A multi-asset
exchange involves the transfer and
receipt of more than one group of
like-kind properties. For example, an
exchange of land, vehicles, and cash for
land and vehicles is a multi-asset
exchange. An exchange of land, vehicles,
and cash for land only is not a multi-asset
exchange. The transfer or receipt of
multiple properties within one like-kind
group is also a multi-asset exchange.
Special rules apply when figuring the
amount of gain recognized and your basis
in properties received in a multi-asset
exchange. For details, see Regulations
section 1.1031(j)-1.
Reporting of multi-asset exchanges.
If you transferred and received (a) more
than one group of like-kind properties or
(b) cash or other (not like-kind) property,
do not complete lines 12 through 18 of
Form 8824. Instead, attach your own
statement showing how you figured the
realized and recognized gain, and enter
the correct amount on lines 19 through
25. Report any recognized gains on
Schedule D; Form 4797, Sales of
Business Property; or Form 6252,
Installment Sale Income, whichever
applies.
Exchanges using a qualified exchange
accommodation arrangement (QEAA).
If property is transferred to an exchange
accommodation titleholder (EAT) and
held in a QEAA, the EAT may be treated
as the beneficial owner of the property,
the property transferred from the EAT to
you may be treated as property you
received in an exchange, and the
property you transferred to the EAT may
be treated as property you gave up in an
exchange. This may be true even if the
property you are to receive is transferred
to the EAT before you transfer the
property you are giving up. However, the
property transferred to you cannot be
treated as property received in an

exchange if you previously owned it within
180 days of its transfer to the EAT. For
details, see Rev. Proc. 2000-37 as
modified by Rev. Proc. 2004-51. Rev.
Proc. 2000-37 is on page 308 of Internal
Revenue Bulletin 2000-40 at www.irs.gov/
pub/irs-irbs/irb00-40.pdf. Rev. Proc.
2004-51, 2004-33 I.R.B. 294, is available
at www.irs.gov/irb/2004-33_IRB/ar13.
html.
Property used as home. If the property
given up was owned and used as your
home during the 5-year period ending on
the date of the exchange, you may be
able to exclude part or all of any gain
figured on Form 8824. For details on the
exclusion (including how to figure the
amount of the exclusion), see Pub. 523,
Selling Your Home. Fill out Form 8824
according to its instructions, with these
exceptions:
1. Subtract line 18 from line 17. Enter
that result on line 19. On the dotted line
next to line 19, enter “Section 121
exclusion” and the amount of the
exclusion.
2. On line 20, enter the smaller of:
a. Line 15 minus the exclusion, or
b. Line 19.
Do not enter less than zero.
3. Subtract line 15 from the sum of
lines 18 and 23. Add the amount of your
exclusion to the result. Enter that sum on
line 25.
Property used partly as home. If the
property given up was used partly as a
home, you will need to use two separate
Forms 8824 as worksheets — one for the
part of the property used as a home and
one for the part used for business or
investment. Fill out only lines 15 through
25 of each worksheet Form 8824. On the
worksheet Form 8824 for the part of the
property used as a home, follow steps (1)
through (3) above, except that instead of
following step (2), enter the amount from
line 19 on line 20. On the worksheet Form
8824 for the part of the property used for
business or investment, follow steps (1)
through (3) above only if you can exclude
at least part of any gain from the
exchange of that part of the property;
otherwise, complete the form according to
its instructions. Enter the combined
amounts from lines 15 through 25 of both
worksheet Forms 8824 on the Form 8824
you file. Do not file either worksheet Form
8824.
More information. For details, see
Rev. Proc. 2005-14, 2005-7 I.R.B. 528,
available at www.irs.gov/irb/2005-7_IRB/
ar10.html.
Exchange of stock in a mutual ditch,
reservoir, or irrigation company. The
exchange of stock in a mutual ditch,
reservoir, or irrigation company may
qualify for the nonrecognition of gain or
loss under section 1031.
The nonrecognition of gain or loss on
the exchange may apply if, at the time of
the exchange:

1. The company is a section
501(c)(12)(A) organization (determined
without regard to the percentage of
income collected from members for the
purpose of meeting losses and
expenses), and
2. The shares of stock in the company
have been recognized by the highest
court in the state in which the company
was organized or by an applicable statute
of that state as constituting or
representing real property or an interest in
real property.
Additional information. For more
information on like-kind exchanges, see
section 1031 and its regulations and Pub.
544.

Specific Instructions
Lines 1 and 2. For real property, enter
the address and type of property. For
personal property, enter a short
description. For property located outside
the United States, include the country.
Line 5. Enter on line 5 the date of the
written identification of the like-kind
property you received in a deferred
exchange. To comply with the 45-day
written identification requirement, the
following conditions must be met.
1. The like-kind property you receive
in a deferred exchange is designated in
writing as replacement property either in a
document you signed or in a written
agreement signed by all parties to the
exchange.
2. The document or agreement
describes the replacement property in a
clear and recognizable manner. Real
property should be described using a
legal description, street address, or
distinguishable name (for example,
“Mayfair Apartment Building”).
3. No later than 45 days after the date
you transferred the property you gave up:
a. You send, fax, or hand deliver the
document you signed to the person
required to transfer the replacement
property to you (including a disqualified
person) or to another person involved in
the exchange (other than a disqualified
person), or
b. All parties to the exchange sign the
written agreement designating the
replacement property.
Generally, a disqualified person is
either your agent at the time of the
transaction or a person related to you. For
more details, see Regulations section
1.1031(k)-1(k).
Note. If you received the replacement
property before the end of the 45-day
period, you automatically are treated as
having met the 45-day written
identification requirement. In this case,
enter on line 5 the date you received the
replacement property.
Line 6. Enter on line 6 the date you
received the like-kind property from the
other party.

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The property must be received by the
earlier of the following dates.
• The 180th day after the date you
transferred the property given up in the
exchange.
• The due date (including extensions) of
your tax return for the year in which you
transferred the property given up.
Line 7. Special rules apply to like-kind
exchanges made with related parties,
either directly or indirectly. A related
party includes your spouse, child,
grandchild, parent, grandparent, brother,
sister, or a related corporation, S
corporation, partnership, trust, or estate.
See section 1031(f).
An exchange made indirectly with a
related party includes:
• An exchange made with a related party
through an intermediary (such as a
qualified intermediary or an exchange
accommodation titleholder, as defined in
Pub. 544), or
• An exchange made by a disregarded
entity (such as a single member limited
liability company) if you or a related party
owned that entity.
If you or the related party (either
directly or indirectly) dispose of property
received in an exchange before the date
that is 2 years after the last transfer which
was part of the exchange, the deferred
gain or (loss) from line 24 must be
reported on your return for the year of
disposition (unless an exception on line
11 applies).
If you are filing this form for 1 of the 2
years following the year of the exchange,
complete Parts I and II. If both lines 9 and
10 are “No,” stop.
If either line 9 or line 10 is “Yes,” and
an exception on line 11 applies, check the
applicable box on line 11, attach any
required explanation, and stop. If no line
11 exceptions apply, complete Part III.
Report the deferred gain or (loss) from
line 24 on this year’s tax return as if the
exchange had been a sale.
An exchange structured to avoid the
related party rules is not a like-kind
exchange. Do not report it on Form 8824.
Instead, you should report the disposition
of the property given up as if the
exchange had been a sale. See section
1031(f)(4). Such an exchange includes
the transfer of property you gave up to a
qualified intermediary in exchange for
property you received that was formerly
owned by a related party if the related
party received cash or other (not
like-kind) property for the property you
received, and you used the qualified
intermediary to avoid the application of
the related party rules. See Rev. Rul.
2002-83 for more details. You can find
Rev. Rul. 2002-83 on page 927 of Internal
Revenue Bulletin 2002-49 at www.irs.gov/
pub/irs-irbs/irb02-49.pdf.
Line 11c. If you believe that you can
establish to the satisfaction of the IRS
that tax avoidance was not a principal
purpose of both the exchange and the
disposition, attach an explanation.
2011 Instructions for Form 8824

Generally, tax avoidance will not be seen
as a principal purpose in the case of:
• A disposition of property in a
nonrecognition transaction,
• An exchange in which the related
parties derive no tax advantage from the
shifting of basis between the exchanged
properties, or
• An exchange of undivided interests in
different properties that results in each
related party holding either the entire
interest in a single property or a larger
undivided interest in any of the properties.
If, after the exchange, you own
replacement property that a
CAUTION related party sold into the
exchange through an unrelated party
such as a qualified intermediary, you
should not check this box unless you can
establish that tax avoidance was not one
of the principal purposes for the structure
of your transaction. If one of the principal
purposes for the structure of your
transaction was tax avoidance, do not
report the transaction on Form 8824.
Instead, you should report the disposition
of the property given up as if the
exchange had been a sale.
Lines 12, 13, and 14. If you gave up
other property in addition to the like-kind
property, enter the fair market value
(FMV) and the adjusted basis of the other
property on lines 12 and 13, respectively.
The gain or (loss) from this property is
figured on line 14 and must be reported
on your return. Report gain or (loss) as if
the exchange were a sale.
Line 15. Include on line 15 the sum of:
• Any cash paid to you by the other
party,
• The FMV of other (not like-kind)
property you received, if any, and
• Net liabilities assumed by the other
party — the excess, if any, of liabilities
(including mortgages) assumed by the
other party over the total of (a) any
liabilities you assumed, (b) cash you paid
to the other party, and (c) the FMV of the
other (not like-kind) property you gave up.
See the example in the instructions for
line 18.
Reduce the sum of the above amounts
(but not below zero) by any exchange
expenses you incurred.
The following rules apply in
determining the amount of liability treated
as assumed.
• A recourse liability (or portion thereof)
is treated as assumed by the party
receiving the property if that party has
agreed to and is expected to satisfy the
liability (or portion thereof). It does not
matter whether the party transferring the
property has been relieved of the liability.
• A nonrecourse liability generally is
treated as assumed by the party receiving
the property subject to the liability.
However, if an owner of other assets
subject to the same liability agrees with
the party receiving the property to, and is
expected to, satisfy part or all of the
liability, the amount treated as assumed is
reduced by the smaller of (a) the amount

!

2011 Instructions for Form 8824

of the liability that the owner of the other
assets has agreed to and is expected to
satisfy or (b) the FMV of those other
assets.
Line 18. Include on line 18 the sum of:
• The adjusted basis of the like-kind
property you gave up,
• Exchange expenses, if any (except for
expenses used to reduce the amount
reported on line 15), and
• Net amount paid to the other
party — the excess, if any, of the total of
(a) any liabilities you assumed, (b) cash
you paid to the other party, and (c) the
FMV of the other (not like-kind) property
you gave up over any liabilities assumed
by the other party.
See Regulations section 1.1031(d)-2
and the following example for figuring
amounts to enter on lines 15 and 18.
Example. A owns an apartment
house with an FMV of $220,000, an
adjusted basis of $100,000, and subject
to a mortgage of $80,000. B owns an
apartment house with an FMV of
$250,000, an adjusted basis of $175,000,
and subject to a mortgage of $150,000.
A transfers his apartment house to B
and receives in exchange B’s apartment
house plus $40,000 cash. A assumes the
mortgage on the apartment house
received from B, and B assumes the
mortgage on the apartment house
received from A.
A enters on line 15 only the $40,000
cash received from B. The $80,000 of
liabilities assumed by B is not included
because it does not exceed the $150,000
of liabilities A assumed. A enters
$170,000 on line 18 — the $100,000
adjusted basis, plus the $70,000 excess
of the liabilities A assumed over the
liabilities assumed by B ($150,000 $80,000).
B enters $30,000 on line 15 — the
excess of the $150,000 of liabilities
assumed by A over the total ($120,000) of
the $80,000 of liabilities B assumed and
the $40,000 cash B paid. B enters on line
18 only the adjusted basis of $175,000
because the total of the $80,000 of
liabilities B assumed and the $40,000
cash B paid does not exceed the
$150,000 of liabilities assumed by A.
Line 21. If you disposed of section 1245,
1250, 1252, 1254, or 1255 property (see
the instructions for Part III of Form 4797),
you may be required to recapture as
ordinary income part or all of the realized
gain (line 19). Figure the amount to enter
on line 21 as follows:
Section 1245 property. Enter the
smaller of:
1. The total adjustments for
deductions (whether for the same or other
property) allowed or allowable to you or
any other person for depreciation or
amortization (up to the amount of gain
shown on line 19), or
2. The gain shown on line 20, if any,
plus the FMV of non-section 1245
like-kind property received.

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Section 1250 property. Enter the
smaller of:
1. The gain you would have had to
report as ordinary income because of
additional depreciation if you had sold the
property (see the Form 4797 instructions
for line 26), or
2. The larger of:
a. The gain shown on line 20, if any,
or
b. The excess, if any, of the gain in
item (1) above over the FMV of the
section 1250 property received.
Section 1252, 1254, and 1255
property. The rules for these types of
property are similar to those for section
1245 property. See Regulations sections
1.1252-2(d) and 1.1254-2(d) and
Temporary Regulations section
16A.1255-2(c) for details. If the
installment method applies to this
exchange:
1. See section 453(f)(6) to determine
the installment sale income taxable for
this year and report it on Form 6252.
2. Enter on Form 6252, line 25 or 36,
the section 1252, 1254, or 1255 recapture
amount you figured on Form 8824, line
21. Do not enter more than the amount
shown on Form 6252, line 24 or 35.
3. Also enter this amount on Form
4797, line 15.
4. If all the ordinary income is not
recaptured this year, report in future years
on Form 6252 the ordinary income up to
the taxable installment sale income, until
it is all reported.
Line 22. Report a gain from the
exchange of property used in a trade or
business (and other noncapital assets) on
Form 4797, line 5 or line 16. Report a
gain from the exchange of capital assets
according to the Schedule D instructions
for your return. Be sure to use the date of
the exchange as the date for reporting the
gain. If the installment method applies to
this exchange, see section 453(f)(6) to
determine the installment sale income
taxable for this year and report it on Form
6252.
Line 24. If line 19 is a loss, enter it on
line 24. Otherwise, subtract the amount
on line 23 from the amount on line 19 and
enter the result. For exchanges with
related parties, see the instructions for
line 7.
Line 25. The amount on line 25 is your
basis in the like-kind property you
received in the exchange. Your basis in
other property received in the exchange,
if any, is its FMV.

Section 1043
Conflict-of-Interest Sales
(Part IV)
If you sell property at a gain according to
a certificate of divestiture issued by the
Office of Government Ethics (OGE) or the
Judicial Conference of the United States
(or its designee) and purchase
replacement property (permitted

property), you can elect to defer part or all
of the realized gain. You must recognize
gain on the sale only to the extent that the
amount realized on the sale is more than
the cost of replacement property
purchased within 60 days after the sale.
(You also must recognize any ordinary
income recapture.) Permitted property is
any obligation of the United States or any
diversified investment fund approved by
the OGE.
If the property you sold was stock
TIP you acquired by exercising a
statutory stock option, you may be
treated as meeting the holding periods
that apply to such stock, regardless of
how long you actually held the stock. This
may benefit you if you do not defer your
entire gain, because it may allow you to
treat the gain as a capital gain instead of
ordinary income. For details, see section
421(d) or Pub. 525, Taxable and
Nontaxable Income.
Complete Part IV of Form 8824 only if
the cost of the replacement property is
more than the basis of the divested
property and you elect to defer the gain.
Otherwise, report the sale on Schedule D
or Form 4797, whichever applies.
Your basis in the replacement property
is reduced by the amount of the deferred
gain. If you made more than one
purchase of replacement property, reduce
your basis in the replacement property in
the order you acquired it.
Line 30. Enter the amount you received
from the sale of the divested property,
minus any selling expenses.

Line 35. Follow these steps to determine
the amount to enter.
1. Use Part III of Form 4797 as a
worksheet to figure ordinary income
under the recapture rules.
2. Enter on Form 8824, line 35, the
amount from Form 4797, line 31. Do not
attach the Form 4797 used as a
worksheet to your return.
3. Report the amount from line 35 on
Form 4797, line 10, column (g). In column
(a), write “From Form 8824, line 35.” Do
not complete columns (b) through (f).
Line 36. If you sold a capital asset, enter
any capital gain from line 36 on Schedule
D. If you sold property used in a trade or
business (or any other asset for which the
gain is treated as ordinary income), report
the gain on Form 4797, line 2 or line 10,
column (g). In column (a), write “From
Form 8824, line 36.” Do not complete
columns (b) through (f).
Paperwork Reduction Act Notice. We
ask for the information on this form to
carry out the Internal Revenue laws of the
United States. You are required to give us
the information. We need it to ensure that
you are complying with these laws and to
allow us to figure and collect the right
amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB

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control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section 6103.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated burden for
individual taxpayers filing this form is
approved under OMB control number
1545-0074 and is included in the
estimates shown in the instructions for
their individual income tax return. The
estimated burden for all other taxpayers
who file this form is shown below.
Recordkeeping . . . . . .
Learning about
the law or the form . . .
Preparing the form . . .
Copying, assembling,
and sending the form
to the IRS . . . . . . . . .

. 10 hr., 17 min.
. 1 hr., 59 min.
. 2 hr., 14 min.
. 10 min.

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. See
the instructions for the tax return with
which this form is filed.

2011 Instructions for Form 8824