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An exchange in which the related

Line 18. Include on line 18 the sum of:

additional depreciation if you had sold the

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parties derive no tax advantage from the

The adjusted basis of the like-kind

property (see the Form 4797 instructions

shifting of basis between the exchanged

property you gave up,

for line 26), or

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properties, or

Exchange expenses, if any (except for

2. The larger of:

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An exchange of undivided interests in

expenses used to reduce the amount

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

different properties that results in each

reported on line 15), and

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related party holding either the entire

Net amount paid to the other

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

interest in a single property or a larger

party — the excess, if any, of the total of

item (1) above over the FMV of the

undivided interest in any of the properties.

(a) any liabilities you assumed, (b) cash

section 1250 property received.

you paid to the other party, and (c) the

If, after the exchange, you own

FMV of the other (not like-kind) property

Section 1252, 1254, and 1255 property.

replacement property that a

you gave up over any liabilities assumed

The rules for these types of property are

related party sold into the

CAUTION

by the other party.

similar to those for section 1245 property.

exchange through an unrelated party

See Regulations section 1.1252-2(d) and

See Regulations section 1.1031(d)-2

such as a qualified intermediary, you

Temporary Regulations section

and the following example for figuring

should not check this box unless you can

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

amounts to enter on lines 15 and 18.

establish that tax avoidance was not one

installment method applies to this

Example. A owns an apartment

of the principal purposes for the structure

exchange:

house with an FMV of $220,000, an

of your transaction. If one of the principal

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

adjusted basis of $100,000, and subject

purposes for the structure of your

the installment sale income taxable for

to a mortgage of $80,000. B owns an

transaction was tax avoidance, do not

this year and report it on Form 6252.

apartment house with an FMV of

report the transaction on Form 8824.

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

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

Instead, you should report the disposition

the section 1252, 1254, or 1255 recapture

and subject to a mortgage of $150,000.

of the property given up as if the

amount you figured on Form 8824, line

exchange had been a sale. See section

A transfers his apartment house to B

21. Do not enter more than the amount

1031(f)(4).

and receives in exchange B’s apartment

shown on Form 6252, line 24 or 35.

house plus $40,000 cash. A assumes the

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

3. Also enter this amount on Form

mortgage on the apartment house

other property in addition to the like-kind

4797, line 15.

received from B, and B assumes the

property, enter the fair market value

4. If all the ordinary income is not

mortgage on the apartment house

(FMV) and the adjusted basis of the other

recaptured this year, report in future years

received from A.

property on lines 12 and 13, respectively.

on Form 6252 the ordinary income up to

The gain or (loss) from this property is

A enters on line 15 only the $40,000

the taxable installment sale income, until

figured on line 14 and must be reported

cash received from B. The $80,000 of

it is all reported.

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

liabilities assumed by B is not included

the exchange were a sale.

Line 22. Report a gain from the

because it does not exceed the $150,000

exchange of property used in a trade or

of liabilities A assumed. A enters

Line 15. Include on line 15 the sum of:

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business (and other noncapital assets) on

$170,000 on line 18 — the $100,000

Any cash paid to you by the other

Form 4797, line 5 or line 16. Report a

adjusted basis, plus the $70,000 excess

party,

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gain from the exchange of capital assets

of the liabilities A assumed over the

The FMV of other (not like-kind)

according to the Schedule D instructions

liabilities assumed by B ($150,000 -

property you received, if any, and

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for your return. Be sure to use the date of

$80,000).

Net liabilities assumed by the other

the exchange as the date for reporting the

party — the excess, if any, of liabilities

B enters $30,000 on line 15 — the

gain. If the installment method applies to

(including mortgages) assumed by the

excess of the $150,000 of liabilities

this exchange, see section 453(f)(6) to

other party over the total of (a) any

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

determine the installment sale income

liabilities you assumed, (b) cash you paid

the $80,000 of liabilities B assumed and

taxable for this year and report it on Form

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

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

6252.

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

18 only the adjusted basis of $175,000

Line 24. If line 19 is a loss, enter it on

because the total of the $80,000 of

Reduce the sum of the above amounts

line 24. Otherwise, subtract the amount

liabilities B assumed and the $40,000

(but not below zero) by any exchange

on line 23 from the amount on line 19 and

cash B paid does not exceed the

expenses you incurred. See the example

enter the result. For exchanges with

$150,000 of liabilities assumed by A.

on this page.

related parties, see the instructions for

Line 21. If you disposed of section 1245,

The following rules apply in

line 7 on page 2.

1250, 1252, 1254, or 1255 property (see

determining the amount of liability treated

Line 25. The amount on line 25 is your

the instructions for Part III of Form 4797),

as assumed.

basis in the like-kind property you

you may be required to recapture as

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A recourse liability (or portion thereof)

received in the exchange. Your basis in

ordinary income part or all of the realized

is treated as assumed by the party

other property received in the exchange,

gain (line 19). Figure the amount to enter

receiving the property if that party has

if any, is its FMV.

on line 21 as follows:

agreed to and is expected to satisfy the

Section 1245 property. Enter the

liability (or portion thereof). It does not

Section 1043

smaller of:

matter whether the party transferring the

Conflict-of-Interest Sales

property has been relieved of the liability.

1. The total adjustments for

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A nonrecourse liability generally is

deductions (whether for the same or other

(Part IV)

treated as assumed by the party receiving

property) allowed or allowable to you or

the property subject to the liability.

any other person for depreciation or

If you sell property at a gain according to

However, if an owner of other assets

amortization (up to the amount of gain

a certificate of divestiture issued by the

subject to the same liability agrees with

shown on line 19), or

Office of Government Ethics (OGE) or the

the party receiving the property to, and is

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

Judicial Conference of the United States

expected to, satisfy part or all of the

plus the FMV of non-section 1245

(or its designee) and purchase

liability, the amount treated as assumed is

like-kind property received.

replacement property (permitted

reduced by the smaller of (a) the amount

property), you can elect to defer part or all

Section 1250 property. Enter the

of the liability that the owner of the other

of the realized gain. You must recognize

smaller of:

assets has agreed to and is expected to

gain on the sale only to the extent that the

satisfy or (b) the FMV of those other

1. The gain you would have had to

amount realized on the sale is more than

assets.

report as ordinary income because of

the cost of replacement property

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Instructions For Form 8824 - Like-Kind Exchanges (And Section 1043 Conflict-Of-Interest Sales) - 2008 Page 3

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