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Report the deferred gain or (loss) from

A enters on line 15 only the $40,000

The FMV of other (not like-kind)

line 24 on this year's tax return as if the

cash received from B. The $80,000 of

property you received, if any, and

exchange had been a sale.

liabilities assumed by B is not included

Net liabilities assumed by the other

because it does not exceed the $150,000

party—the excess, if any, of liabilities

An exchange structured to avoid the

of liabilities A assumed. A enters $170,000

(including mortgages) assumed by the

related party rules is not a like-kind

on line 18—the $100,000 adjusted basis,

other party over the total of (a) any

exchange. Do not report it on Form 8824.

plus the $70,000 excess of the liabilities A

liabilities you assumed, (b) cash you paid

Instead, you should report the disposition

assumed over the liabilities assumed by B

to the other party, and (c) the FMV of the

of the property given up as if the exchange

($150,000 - $80,000).

other (not like-kind) property you gave up.

had been a sale. See section 1031(f)(4).

Such an exchange includes the transfer of

B enters $30,000 on line 15—the

See the example in the instructions for

property you gave up to a qualified

excess of the $150,000 of liabilities

line 18.

intermediary in exchange for property you

assumed by A over the total ($120,000) of

Reduce the sum of the above amounts

received that was formerly owned by a

the $80,000 of liabilities B assumed and

(but not below zero) by any exchange

related party if the related party received

the $40,000 cash B paid. B enters on

expenses you incurred.

cash or other (not like-kind) property for

line 18 only the adjusted basis of

The following rules apply in

the property you received, and you used

$175,000 because the total of the $80,000

determining the amount of liability treated

the qualified intermediary to avoid the

of liabilities B assumed and the $40,000

as assumed.

application of the related party rules. See

cash B paid does not exceed the

A recourse liability (or portion thereof) is

Rev. Rul. 2002-83 for more details. You

$150,000 of liabilities assumed by A.

treated as assumed by the party receiving

can find Rev. Rul. 2002-83 on page 927 of

Line 21. If you disposed of section 1245,

the property if that party has agreed to and

Internal Revenue Bulletin 2002-49 at

1250, 1252, 1254, or 1255 property (see

is expected to satisfy the liability (or

the instructions for Part III of Form 4797),

portion thereof). It does not matter

Line 11c. If you believe that you can

you may be required to recapture as

whether the party transferring the property

establish to the satisfaction of the IRS that

ordinary income part or all of the realized

has been relieved of the liability.

tax avoidance was not a principal purpose

gain (line 19). Figure the amount to enter

A nonrecourse liability generally is

of both the exchange and the disposition,

on line 21 as follows:

treated as assumed by the party receiving

attach an explanation. Generally, tax

the property subject to the liability.

Section 1245 property. Enter the

avoidance will not be seen as a principal

However, if an owner of other assets

smaller of:

purpose in the case of:

subject to the same liability agrees with

1. The total adjustments for

A disposition of property in a

the party receiving the property to, and is

deductions (whether for the same or other

nonrecognition transaction,

expected to, satisfy part or all of the

property) allowed or allowable to you or

An exchange in which the related

liability, the amount treated as assumed is

any other person for depreciation or

parties derive no tax advantage from the

reduced by the smaller of (a) the amount

amortization (up to the amount of gain

shifting of basis between the exchanged

of the liability that the owner of the other

shown on line 19), or

properties, or

assets has agreed to and is expected to

An exchange of undivided interests in

2. The gain shown on line 20, if any,

satisfy or (b) the FMV of those other

different properties that results in each

plus the FMV of non-section 1245

assets.

related party holding either the entire

like-kind property received.

Line 18. Include on line 18 the sum of:

interest in a single property or a larger

Section 1250 property. Enter the

The adjusted basis of the like-kind

undivided interest in any of the properties.

smaller of:

property you gave up,

If, after the exchange, you own

Exchange expenses, if any (except for

1. The gain you would have had to

replacement property that a

expenses used to reduce the amount

report as ordinary income because of

related party sold into the

reported on line 15), and

additional depreciation if you had sold the

CAUTION

exchange through an unrelated party such

Net amount paid to the other party—the

property (see the Form 4797 instructions

as a qualified intermediary, you should not

excess, if any, of the total of (a) any

for line 26), or

check this box unless you can establish

liabilities you assumed, (b) cash you paid

2. The larger of:

that tax avoidance was not one of the

to the other party, and (c) the FMV of the

a. The gain shown on line 20, if any,

principal purposes for the structure of your

other (not like-kind) property you gave up

transaction. If one of the principal

over any liabilities assumed by the other

purposes for the structure of your

party.

b. The excess, if any, of the gain in

transaction was tax avoidance, do not

item (1) above over the FMV of the section

See Regulations section 1.1031(d)-2

report the transaction on Form 8824.

1250 property received.

and the following example for figuring

Instead, you should report the disposition

amounts to enter on lines 15 and 18.

Section 1252, 1254, and 1255

of the property given up as if the exchange

property. The rules for these types of

had been a sale.

Example. A owns an apartment house

property are similar to those for section

with an FMV of $220,000, an adjusted

1245 property. See Regulations sections

Lines 12, 13, and 14. If you gave up

basis of $100,000, and subject to a

1.1252-2(d) and 1.1254-2(d) and

other property in addition to the like-kind

mortgage of $80,000. B owns an

Temporary Regulations section

property, enter the fair market value (FMV)

apartment house with an FMV of

16A.1255-2(c) for details. If the installment

and the adjusted basis of the other

$250,000, an adjusted basis of $175,000,

method applies to this exchange:

property on lines 12 and 13, respectively.

and subject to a mortgage of $150,000.

The gain or (loss) from this property is

1. See section 453(f)(6) to determine

A transfers his apartment house to B

figured on line 14 and must be reported on

the installment sale income taxable for this

and receives in exchange B's apartment

your return. Report gain or (loss) as if the

year and report it on Form 6252.

house plus $40,000 cash. A assumes the

exchange were a sale.

mortgage on the apartment house

2. Enter on Form 6252, line 25 or 36,

Line 15. Include on line 15 the sum of:

received from B, and B assumes the

the section 1252, 1254, or 1255 recapture

Any cash paid to you by the other party,

mortgage on the apartment house

amount you figured on Form 8824, line 21.

received from A.

2013 Instructions for Form 8824

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Instructions For Form 8824 - Like-Kind Exchanges (And Section 1043 Conflict-Of-Interest Sales) - 2013 Page 3

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