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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
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I cant get the numbers right on Form 8824(Parts I,Ii and III)

Customer Question

I can't get the numbers right on Form 8824(Parts I,Ii and III) to match the figure given to me for the capital gain I owe on the 1031 house exchange I created, both in 2012(within 45 days). I can furnish you with the raw data(e.g. dates put in service, cost basis,etc). I need answers ASAP.

Leonard Levine
Submitted: 4 years ago.
Category: Tax
Expert:  R. Klein, EA replied 4 years ago.

Randalltax :

Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.

Randalltax :

I will not be able to help with the software or the form specifically, but let's go through the facts and see how this should work out in a general sense. Perhaps that will give you an idea how to fill out the form.

Randalltax :

First of all, can you give some brief details of the transaction.

Randalltax :

Original property: What is the original cost basis and how much depreciation was reported since purchase?

Randalltax :

What was the "sale": price if the first property?

JACUSTOMER-rktp2cmi- :

I sold a rental,multi-family house, which I purchased for $22,250 on January 1st,1991 and sold it on September 27,2012 for $225,768. After 21 years of depreciation, the remaining depreciation is around $4000. The cost of the sale(commission,closing costs,etc.)were$23,537. Within 45 days, on October 9th,2012, I purchased a condo for $115,379, for which I paid cash. The 1031 agency handling the sale and purchase charged me $875 and told me the capital gains for this long-term sale would be 15% of $86,852 tot

Randalltax :

OK, so based on this: Your ADJUSTED basis was 27537.

Randalltax :

your total gain was about 98K

Randalltax :

You purchased the condo 115379 of which 27537 was original basis and 87842 was deferred gain.

JACUSTOMER-rktp2cmi- :

Since we already know I owe 15% of $86,852 plus my other income, I should be able to fill in the other blanks on the 8824, but I can't seem to fit those numbers into the spaces given.

Randalltax :

Sorry bad calc...the TOTAL gain was 198K, not 98K

Randalltax :

The cash taken out was about 110,158 NOT 86K

Randalltax :

This is the correct taxable portion.

JACUSTOMER-rktp2cmi- :

Are you saying I am responsible for paying capital gains tax on $198,000? That some of that, mainly $112,000 will not be deferred?

Randalltax :

No.

Randalltax :

I am verifying my figures now

JACUSTOMER-rktp2cmi- :

If you're right, that agency is incorrect in telling me I must pay all of the proceeds in this tax year and cannot defer any of the proceeds

Randalltax :

My numbers above are correct.

Randalltax :

Note that I stated that the cash taken out was about 110K. THis IS the gain

Randalltax :

(It is not 198K or 86K)

Randalltax :

THe deferred gain is about 87K, as I stated above

Randalltax :

What happens is that all your original basis, PLUS the selling expenses goes into the new property

Randalltax :

Also, the gain goes into the new property, but combined it can only be the 115K

Randalltax :

OK. Well, I am sorry that you do not agree.

Randalltax :

Have a good evening and good luck with your transaction.

Randalltax :

just so you are aware, 18K of this transaction is subject to ordinary tax because it is considered recapture of depreciation.

Randalltax :

PLease provide a positive feedback and rating when you determine that this information is correct.