Tax season can feel overwhelming, especially if you’ve sold and purchased investment property. If you participated in a like-kind exchange, understanding IRS Form 8824 is essential to staying compliant and deferring capital gains tax.
What Is IRS Form 8824?
IRS Form 8824 is used to report like-kind exchanges of business or investment property under Section 1031 of the Internal Revenue Code. It helps taxpayers disclose the transaction details and calculate any gain or loss deferred from the exchange.
Why It Matters
Like-kind exchanges allow you to defer capital gains taxes when you exchange qualifying property for similar property. This form ensures the IRS knows:
- What was exchanged
- The value of the transaction
- Whether you received cash or other non-like-kind property
Common Use Cases
- Real estate investors swapping rental properties
- Businesses exchanging equipment or vehicles
- Property owners upgrading commercial assets
What Qualifies as a Like-Kind Exchange?
A like-kind exchange must meet specific IRS criteria. It generally involves the trade of one investment or business-use property for another of the same nature, even if the quality or grade differs.
What the IRS Considers Like-Kind
The IRS defines like-kind property broadly for real estate, especially under the rules of Section 1031. To qualify for tax-deferred treatment via IRS Form 8824, the exchanged properties must be of the same nature or character, even if they differ in quality or location.
Here are qualifying examples:
Investment or Business Real Estate
- Example: Trading a residential rental property in one state for a commercial warehouse in another.
- Why it qualifies: Both properties are held for investment or productive use in a trade or business, not for personal use.
Vacant Land for Improved Property
- Example: Swapping raw farmland for a multi-unit apartment complex.
- Why it qualifies: Despite differences in development, both properties are held for long-term investment.
Business Equipment (Pre-2018 Only)
- Example: Exchanging a fleet of work trucks for construction equipment.
- Why it qualified (pre-2018): Under prior law, certain tangible personal property used in a trade or business was eligible for like-kind exchange treatment. This rule no longer applies—as of 2018, only real estate qualifies.
The 2017 Tax Cuts and Jobs Act eliminated like-kind treatment for personal property, limiting it strictly to real property starting in tax year 2018.
What the IRS Doesn’t Consider Like-Kind
Some property types are specifically excluded from like-kind exchange treatment, even if they appear similar in value or function. Here’s what won’t qualify:
Personal Residences
- Example: Swapping your primary home for another family home.
- Why it doesn’t qualify: Like-kind exchanges only apply to investment or business-use real estate, not personal-use property.
Flips or Inventory Properties
- Example: A developer trading one fixer-upper for another.
- Why it doesn’t qualify: Properties held primarily for resale (such as flips or builder inventory) are considered dealer property and are not eligible under Section 1031.
Foreign Property
- Example: Exchanging a rental property in Florida for one in Costa Rica.
- Why it doesn’t qualify: Real property located outside the United States does not qualify as like-kind to U.S. real estate.
Stocks, Bonds, and Partnership Interests
- Example: Swapping shares in a real estate investment trust (REIT) or a business partnership.
- Why it doesn’t qualify: Financial instruments are explicitly excluded from Section 1031, regardless of the investment intent.
Timing Rules
- 45 Days: You must identify the replacement property within 45 days of selling your original property.
- 180 Days: You must close on the replacement property within 180 days.
These deadlines are strict and can’t be extended.
Who Needs to File Form 8824?
You must file IRS Form 8824 if you completed a like-kind exchange during the tax year.
Applicable Taxpayers:
- Individuals who exchange investment property
- Partnerships and LLCs involved in real estate transactions
- Corporations participating in business property swaps
Even if the entire gain was deferred, you must still file Form 8824.
Step-by-Step Instructions for Completing IRS Form 8824
Form 8824 has four parts. Here’s a breakdown of what each section entails:
Part I: Description of Like-Kind Exchange
- Enter a detailed description of both properties (given and received)
- Include dates of exchange and identification
Part II: Related Party Transactions
- Disclose if you exchanged property with a related party (family member, business, etc.)
- Additional rules may apply, and immediate resale can invalidate the tax deferral
Part III: Realized and Recognized Gain or Loss
- Calculate the gain realized and any portion recognized (taxable)
- Report any boot received
Part IV: Deferral of Gain
- Finalize the computation of deferred gain and adjusted basis in the new property
Documents You’ll Need:
- Closing statements for both properties
- Appraisals or valuation reports
- Legal ownership documents
- Any cash or boot details received
When and Where to File Form 8824
Filing Deadline:
- File Form 8824 by the tax return due date, including extensions
- Individuals: April 15 (or October 15 with an extension)
- Partnerships and S corps: March 15
- C corps: April 15 or the 15th day of the 4th month after the fiscal year-end
Where to File:
- Electronically: Attach to your e-filed return via tax software
- Paper Filing: Attach it to your paper return and mail it to the IRS
Make sure to include it with the correct return form (1040, 1065, 1120, etc.) based on your entity type.
Common Mistakes to Avoid
Reporting a like-kind exchange incorrectly can trigger IRS audits or penalties. Here are the key mistakes to watch out for:
- Not Filing Form 8824: Even fully deferred exchanges must be reported
- Misidentifying Property: Only real property qualifies after 2018; personal property does not
- Incorrect Gain Calculations: Be precise with boot and depreciation recapture
- Overlooking Related-Party Rules: Special rules apply and can disqualify deferral
IRS Form 8824 vs. Other Real Estate Tax Forms
Knowing how Form 8824 fits in with other tax forms is essential:
- Form 4797: Used for reporting gains from the sale of business property. If your exchange wasn’t entirely like-kind, you may need to file this as well.
- Schedule D: If any portion of the gain is recognized, it could appear here.
- K-1 Statements: Partnerships and S-Corps may pass gain information to partners or shareholders.
- Depreciation Recapture: Must be reported and is not deferrable through 1031
Filing IRS Form 8824 correctly is crucial to preserving your tax deferral. With the complexity of real estate deals and IRS rules, even small mistakes can lead to big consequences.
Get peace of mind by working with a qualified tax professional.
Check out more helpful tips and tax guidance on the Tax Relief Helpers Blog.
Whether you’re a seasoned investor or handling your first 1031 exchange, our experts can help you:
- Navigate complex filing requirements
- Calculate the accurate gain or loss
- Avoid costly tax errors
Let us simplify your tax season. Visit TaxReliefHelpers.com to get started.
Frequently Asked Questions
Can I file Form 8824 for a partial exchange?
Yes. If you received some non-like-kind property (cash, services, etc.), you still report the full exchange and recognize the gain only on the non-like-kind portion.
What if the exchange failed?
If you received cash instead of the replacement property, you can’t defer the gain. The transaction becomes a taxable sale, not a 1031 exchange.
How do I report a delayed exchange?
Delayed exchanges are common and fully eligible under 1031. Just ensure you follow the 45- and 180-day rules and report the timeline accurately in Part I.
Do I still need to file if there was no gain?
Yes. The IRS still requires disclosure of the transaction even if no taxable gain was realized.
Written by: Thomas Brooks
Published: August 4, 2025