Like-Kind Exchanges

2012

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.

line 23, and the total basis of all like-kind
property received on line 25.

General Instructions

How to get the latest information. For
the latest information about this form and
its instructions, go to www.irs.gov/
form8824.

Future developments. For the latest
information about developments related to
Form 8824 and its instructions, such as
legislation enacted after they were
published, go to www.irs.gov/form8824.

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

Jun 21, 2012

When To File

If during the current tax year you
transferred property to another party in a
like-kind exchange, you must file Form
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
mutual ditch, reservoir, or
irrigation company, see the
discussion later.

TIP

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.
Cat. No. 12597K

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
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:

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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.
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.
2012 Instructions for Form 8824

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. 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
2012 Instructions for Form 8824

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
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
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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.
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
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.

TIP

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,

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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
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.

2012 Instructions for Form 8824