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Old 02-23-2015, 11:28 PM
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1031 Exchange Reporting

I am a bit confused about reporting out on my 1031 exchange.

I have filled out the 8824 on this 1250 property. I calculated my realized gain but there was no Recognized gain (which is of course the whole point of the 1031 exchange).

Now my reading of the IRS instructions is that you also have to fill out form 4797 for the sale of a business property. It seems to go through the same process of calculating the Realized gain.

Now the problem is that there doesn't seem to be a way to reconcile the gain reported on the 4797 with the fact that it is tax deferred. There don't seem to be any options that make it clear, so it ultimately looks like it is all taxable income (when it should be tax deferred).

So am I misreading the instructions and I don't in fact have to fill out the 4797 if the gain is not Recognized or is there something else I am missing that will subtract the gains back out?

I asked the HRBlock tax expert and he just told me adjust my basis value up in form 4797 so that it will zero out the gain. However, that seems like a quick and dirty work around. Is there really no straightforward reporting method for 1031 exhanges?

Thanks to anyone who can help.

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