In a reverse 1031 exchange, when the replacement property is acquired before the sale of the old property, there is a parking arrangement known as a Qualified Exchange Accommodation Agreement with the Exchange Accommodation Titleholder or EAT and a simultaneous exchange agreement. The 8824 forms are filed in the year the relinquished property title is conveyed. If multiple exchanges are completed, the IRS instructs filers to include a summary page along with responses to form 8824 for each exchange. The qualified intermediary who accommodated the 1031 exchange is to be identified, including their tax identification number, per question seven and nine.

Should the related party who acquired the old property from the taxpayer sell the property within two years of the 1031 exchange, the tax deferred in the 1031 exchange is triggered. In-laws are not considered a related party. A related party is a grandparent, parent, child, sibling, trust or entity where the taxpayer owns fifty percent or more. The related party questions are looking for those 1031 exchanges where a related party was involved in purchasing or selling their property to the taxpayer. The first three parts are typically completed while part four is to be completed by officers or employees of the executive branch of the federal government.

The four part form 8824 asks a series of questions including descriptions of the property sold and acquired, the 45 th calendar day the replacement property was identified and received, related party, realized and recognized gain and basis of like-kind property received. It is the responsibility of the taxpayer to itemize the 1031 exchange when filing their federal tax return to report the exchange proceeds were used towards the acquisition of replacement property in a like-kind exchange. In exchanges of US real estate, a 1099 is generated by the closing company with a copy forwarded to the IRS and to the taxpayer. A 1031 like-kind exchange is a tax strategy that allows the taxpayer to defer indefinitely the federal and state capital gain tax triggered by the sale of real property held for productive use in a trade, business or for investment when replaced with like-kind property within 180 calendar days of the initial transaction. Internal Revenue Service (IRS) Form 8824 is used by the individual, corporate, resident and non-resident taxpayer to report their 1031 like-kind exchange.

Irs form 8824 worksheet