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If either line 9 or line 10 is “Yes,” and an

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

house plus $40,000 cash. A assumes the

exception on line 11 applies, check the

exchange were a sale.

mortgage on the apartment house

applicable box on line 11, attach any

received from B, and B assumes the

Line 15. Include on line 15 the sum of:

required explanation, and stop. If no

mortgage on the apartment house

Any cash paid to you by the other party,

line 11 exceptions apply, complete Part III.

received from A.

The FMV of other (not like-kind)

Report the deferred gain or (loss) from

A enters on line 15 only the $40,000

property you received, if any, and

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

cash received from B. The $80,000 of

Net liabilities assumed by the other

exchange had been a sale.

liabilities assumed by B is not included

party—the excess, if any, of liabilities

An exchange structured to avoid the

because it does not exceed the $150,000

(including mortgages) assumed by the

related party rules is not a like-kind

of liabilities A assumed. A enters $170,000

other party over the total of (a) any

exchange. Do not report it on Form 8824.

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

liabilities you assumed, (b) cash you paid

Instead, you should report the disposition

plus the $70,000 excess of the liabilities A

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

of the property given up as if the exchange

assumed over the liabilities assumed by B

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

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

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

See the example in the instructions for

Such an exchange includes the transfer of

B enters $30,000 on line 15—the

line 18.

property you gave up to a qualified

excess of the $150,000 of liabilities

Reduce the sum of the above amounts

intermediary in exchange for property you

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

(but not below zero) by any exchange

received that was formerly owned by a

the $80,000 of liabilities B assumed and

expenses you incurred.

related party if the related party received

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

cash or other (not like-kind) property for

The following rules apply in

line 18 only the adjusted basis of

the property you received, and you used

determining the amount of liability treated

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

the qualified intermediary to avoid the

as assumed.

of liabilities B assumed and the $40,000

application of the related party rules. See

A recourse liability (or portion thereof) is

cash B paid does not exceed the

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

treated as assumed by the party receiving

$150,000 of liabilities assumed by A.

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

the property if that party has agreed to and

Line 21. If you disposed of section 1245,

Internal Revenue Bulletin 2002-49 at

is expected to satisfy the liability (or

1250, 1252, 1254, or 1255 property (see

portion thereof). It does not matter

the instructions for Part III of Form 4797),

whether the party transferring the property

Line 11c. If you believe that you can

you may be required to recapture as

has been relieved of the liability.

establish to the satisfaction of the IRS that

ordinary income part or all of the realized

A nonrecourse liability generally is

tax avoidance was not a principal purpose

gain (line 19). Figure the amount to enter

treated as assumed by the party receiving

of both the exchange and the disposition,

on line 21 as follows:

the property subject to the liability.

attach an explanation. Generally, tax

However, if an owner of other assets

Section 1245 property. Enter the

avoidance will not be seen as a principal

subject to the same liability agrees with

smaller of:

purpose in the case of:

the party receiving the property to, and is

A disposition of property in a

1. The total adjustments for deductions

expected to, satisfy part or all of the

nonrecognition transaction,

(whether for the same or other property)

liability, the amount treated as assumed is

An exchange in which the related

allowed or allowable to you or any other

reduced by the smaller of (a) the amount

parties derive no tax advantage from the

person for depreciation or amortization (up

of the liability that the owner of the other

shifting of basis between the exchanged

to the amount of gain shown on line 19), or

assets has agreed to and is expected to

properties, or

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

satisfy or (b) the FMV of those other

An exchange of undivided interests in

plus the FMV of non-section 1245

assets.

different properties that results in each

like-kind property received.

related party holding either the entire

Line 18. Include on line 18 the sum of:

Section 1250 property. Enter the

interest in a single property or a larger

The adjusted basis of the like-kind

smaller of:

undivided interest in any of the properties.

property you gave up,

1. The gain you would have had to

Exchange expenses, if any (except for

If, after the exchange, you own

report as ordinary income because of

expenses used to reduce the amount

replacement property that a

additional depreciation if you had sold the

reported on line 15), and

related party sold into the

CAUTION

property (see the Form 4797 instructions

Net amount paid to the other party—the

exchange through an unrelated party such

for line 26), or

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

as a qualified intermediary, you should not

liabilities you assumed, (b) cash you paid

2. The larger of:

check this box unless you can establish

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

that tax avoidance was not one of the

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

other (not like-kind) property you gave up

principal purposes for the structure of your

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

over any liabilities assumed by the other

transaction. If one of the principal

(1) above over the FMV of the section

party.

purposes for the structure of your

1250 property received.

transaction was tax avoidance, do not

See Regulations section 1.1031(d)-2

report the transaction on Form 8824.

and the following example for figuring

Section 1252, 1254, and 1255

Instead, you should report the disposition

amounts to enter on lines 15 and 18.

property. The rules for these types of

of the property given up as if the exchange

property are similar to those for section

Example. A owns an apartment house

had been a sale.

1245 property. See Regulations sections

with an FMV of $220,000, an adjusted

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

basis of $100,000, and subject to a

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

Temporary Regulations section 16A.

mortgage of $80,000. B owns an

other property in addition to the like-kind

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

apartment house with an FMV of

property, enter the fair market value (FMV)

method applies to this exchange:

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

and the adjusted basis of the other

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

and subject to a mortgage of $150,000.

property on lines 12 and 13, respectively.

the installment sale income taxable for this

The gain or (loss) from this property is

A transfers his apartment house to B

year and report it on Form 6252.

figured on line 14 and must be reported on

and receives in exchange B's apartment

2012 Instructions for Form 8824

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Instructions For Form 8824 - Like-Kind Exchanges (And Section 1043 Conflict-Of-Interest Sales) - 2012 Page 3

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