Form 8824 is where a 1031 exchange gets reported to the IRS. Most of it is property details and dates; the gain calculation in Part III is the part that rewards care. The usual errors are the wrong basis, forgotten depreciation recapture, skipping the form when all gain is deferred, and vague property descriptions.
A 1031 exchange can defer the entire gain on an investment property, no matter how large. The tax does not vanish; it rides along into the replacement property you buy. Either way, the exchange has to be reported. Form 8824, "Like-Kind Exchanges," is where it goes. You file it with your federal return for the year the relinquished property's sale closes, even when the recognized gain is zero.
The form has three parts. Two are mostly descriptions and dates. The third is the arithmetic that decides how much gain you defer and what basis you carry forward. Below is a line map, then one exchange carried all the way through.
Form 8824 line map
Section | Lines | What it covers |
|---|---|---|
Part I - Information on the exchange | 1-5 | Descriptions of relinquished and replacement properties, dates of sale and acquisition, identification deadline, exchange deadline, identification rule used |
Part II - Related party exchanges | 6-10 | Applies only if you bought from or sold to a family member, business partner, or related entity; skip if not applicable |
Part III - Realized gain, recognized gain, and basis | 12-25 | Sale price, adjusted basis, realized gain, boot received, recognized gain, deferred gain, basis of replacement property |
Part I: what to enter
Line 1 - Description of relinquished property. Use the street address: "123 Main Street, Denver, CO 80202." Add the legal description if you have it.
Line 2 - Date relinquished property was originally acquired. The date you bought or received it.
Line 3 - Date relinquished property was transferred. Your sale's closing date.
Line 4 - Description of replacement property. Street address and legal description.
Line 5 - Date replacement property was identified. The date your written identification reached your qualified intermediary (QI), the third party that holds the sale proceeds between the two closings.
Line 6 - Date replacement property was received. The closing date of your replacement purchase.
Line 7 - Was the exchange made with a related party? If yes, complete Part II. If no, move to Part III.
Identification-rule checkbox. Indicate whether you used the 3-Property Rule, the 200% Rule, or the 95% Rule.
Part III: the gain calculation (line by line)
The numbering follows the current form. Your CPA runs the math; the goal here is to see what each line is doing, especially the boot lines. Boot is any non-like-kind value you walk away with, such as cash or a reduction in your mortgage debt, and it is what turns deferred gain into taxable gain.
Line | Label | What to enter |
|---|---|---|
12 | Fair market value of replacement property received | Purchase price of your replacement property |
13 | Adjusted basis of replacement property (if related party) | Skip unless related party |
15 | Net cash received (or paid) | Cash boot received; enter $0 if none |
16 | FMV of other (non-like-kind) property received | Personal property received in the exchange, if any |
17 | Net liabilities assumed by other party minus net liabilities you assumed | Mortgage boot, if any (old mortgage minus new mortgage, if positive) |
18 | Total boot received (sum of 15, 16, 17) | Combined cash, personal property, and mortgage boot |
19 | Adjusted basis of relinquished property | Original cost minus accumulated depreciation minus prior adjustments |
20 | Realized gain (line 12 + 18 - 19, simplified) | Total gain on the exchange |
21 | Recognized gain | Lesser of realized gain (line 20) or total boot (line 18) |
24 | Basis of replacement property | Calculated per IRS instructions; generally: replacement FMV minus deferred gain |
Worked example
Facts:
Item | Value |
|---|---|
Relinquished property | 123 Main St, Denver, CO - residential rental |
Date acquired | January 15, 2015 |
Original cost | $350,000 ($280,000 building, $70,000 land) |
Depreciation claimed (10 years) | $101,818 (residential: $280,000 / 27.5 years x 10 years) |
Adjusted basis | $248,182 ($350,000 - $101,818) |
Sale price | $700,000 |
Selling costs (commission + closing) | $44,000 |
Net sale price | $656,000 |
Old mortgage payoff | $150,000 |
Net cash to QI | $506,000 |
QI fee (paid from proceeds) | $1,000 |
Replacement property | 456 Oak Ave, Denver, CO - residential rental |
Replacement purchase price | $725,000 |
New mortgage | $220,000 |
Cash from QI at replacement closing | $505,000 |
Replacement closing date | November 10, 2025 (within 180 days) |
Filling out Part I
Line | Entry |
|---|---|
1 (relinquished description) | 123 Main Street, Denver, CO 80202 - residential rental house |
2 (date acquired) | 01/15/2015 |
3 (date transferred) | 06/01/2025 |
4 (replacement description) | 456 Oak Avenue, Denver, CO 80202 - residential rental house |
5 (date identified) | 07/01/2025 |
6 (date received) | 11/10/2025 |
7 (related party?) | No |
Identification rule | 3-Property Rule |
Filling out Part III
Line | Calculation | Amount |
|---|---|---|
12 - FMV of replacement property | Purchase price | $725,000 |
15 - Cash boot received | QI proceeds ($506,000) minus QI fee ($1,000) minus cash used at closing ($505,000) | $0 |
16 - Non-like-kind property received | None | $0 |
17 - Mortgage boot | Old mortgage ($150,000) minus new mortgage ($220,000) = negative, so $0 | $0 |
18 - Total boot | $0 + $0 + $0 | $0 |
19 - Adjusted basis of relinquished property | $350,000 - $101,818 | $248,182 |
20 - Realized gain | $656,000 net sale price - $248,182 basis | $407,818 |
21 - Recognized gain under Sec. 1031 | Lesser of realized gain ($407,818) or boot ($0) | $0 |
24 - Basis of replacement property | $725,000 - $407,818 deferred gain | $317,182 |
Result: $0 recognized gain. The full $407,818 gain is deferred, and the replacement property starts with a basis of $317,182 for future depreciation.
Depreciation recapture note: The $101,818 in prior depreciation isn't separately taxed here because no gain was recognized. Sell the replacement property later without exchanging again, and the recapture comes due then. Your CPA should track the carried-over depreciation for future reporting.
Common mistakes
1. Wrong adjusted basis. Reporting the original purchase price without subtracting depreciation. Buy for $350,000, claim $101,818 in depreciation, and your basis is $248,182, not $350,000. Your CPA can pull the depreciation schedule.
2. Skipping the form when no gain is recognized. Form 8824 is required for every 1031 exchange, zero recognized gain included. It reports the exchange itself, not just the tax owed, and a missing form can prompt IRS questions years later.
3. Incorrect boot reporting. Under-reporting cash or mortgage boot. Receive $25,000 in boot and it belongs on line 18. The IRS cross-references your 1099-S and settlement statements.
4. Vague property descriptions. Use specific street addresses and legal descriptions, not generic labels like "commercial real estate in Denver."
5. Wrong QI information. Confirm the qualified intermediary's exact legal entity name and EIN from the exchange agreement before filing.
6. Undisclosed missed deadlines. If you blew the 45-day window to identify a replacement or the 180-day window to close, don't file as if the exchange succeeded. Work with your CPA on the correct treatment.
Documentation to gather before tax time
Hand these to your CPA before they prepare the form.
Relinquished property:
- Original purchase closing statement (date and cost)
- Depreciation schedule showing total depreciation claimed
- Sale closing statement (sale price, commissions, costs, net proceeds)
- Mortgage payoff statement
Replacement property:
- Purchase agreement and closing statement (acquisition date and cost)
- New mortgage documents (loan amount)
- QI final accounting (funds received, disbursed, balance)
Exchange timeline:
- Exchange agreement from QI
- Identification letter with proof of timely delivery
- QI confirmation of all deadlines
QI information:
- Legal entity name and EIN
- Mailing address
Then review the completed draft for accurate property descriptions, dates, and gain calculations before you sign.
Calculate your specific numbers to confirm gain and boot before filing. If anything about your basis or recapture is uncertain, consult your CPA or an experienced 1031 advisor.
Form 8824 is required for every 1031 exchange, even one that recognizes zero gain, and it's filed with your return for the year the exchange closes. Leave the gain and basis math to your CPA, but know what each line is reporting and why it matters. Gather your documents before tax time using the checklist above.
Frequently asked questions
Do I have to file Form 8824 if I deferred all my gain (zero boot)?
Yes. Even with zero recognized gain and zero tax owed, you still file Form 8824 to report the exchange. The IRS wants a record of every exchange, not only the ones that produce a tax bill.
What is depreciation recapture and why does it matter for Form 8824?
Depreciation recapture is the depreciation you claimed on the relinquished property over the years. When you sell, that amount is recaptured and taxed at 25%, higher than the long-term capital gains rate, and it feeds into the gain calculation on the form.
If I did an exchange years ago, do I need to file Form 8824 now?
No. Form 8824 is filed for the year you complete the exchange. Complete it in 2024 and it goes with your 2024 return, filed in early 2025. Once filed, there's nothing to refile.
What if my qualified intermediary's information is wrong on the form?
Correct it. Get the QI's proper name, EIN, and address from your exchange agreement or closing documents. The IRS uses those details to cross-reference and verify exchanges, and wrong information can delay your filing or invite an inquiry.
How does Section 1231 gain factor into the form?
Section 1231 gain and ordinary income section 1245 recapture are reported separately. Your depreciation recapture is typically taxed at the higher 25% rate. Ask your CPA how to split these and report each on the right form.