How to Fill Out IRS Form 8824 (w/Examples) + FAQs

You file IRS Form 8824 to report a like-kind exchange of real property held for business or investment, defer capital gains tax under Internal Revenue Code Section 1031, and disclose any taxable boot received. The form has four parts, and each line carries direct tax consequences if you miscalculate basis, miss a deadline, or misreport related-party transactions.

The problem most taxpayers face is simple: a single math error on Line 15, a missed 45-day identification window, or a botched related-party disclosure can trigger full gain recognition, 20% long-term capital gains tax, 25% unrecaptured Section 1250 depreciation recapture, the 3.8% Net Investment Income Tax, plus state tax and accuracy-related penalties under IRC §6662.

According to the Federation of Exchange Accommodators, Section 1031 exchanges support roughly 568,000 jobs and contribute over $55 billion annually to U.S. GDP, which is why the IRS scrutinizes Form 8824 closely.

Here is what you will learn in this guide:

📋 How to fill out every line of Form 8824, Parts I through IV, with worked numbers
🏠 How the Tax Cuts and Jobs Act limits 1031 exchanges to real property only
💰 How to calculate boot, recognized gain, and your new basis without overpaying tax
⏱️ How to meet the strict 45-day identification and 180-day closing deadlines
⚠️ How to avoid related-party traps, state clawback rules like California’s FTB 3840, and the most common audit triggers

What Is IRS Form 8824 and Who Must File It

Form 8824, Like-Kind Exchanges, is the IRS document you attach to your federal income tax return for the year you transfer property in a like-kind exchange. The form tells the IRS you swapped one investment or business real property for another, and that you are deferring gain under Section 1031. You also use it to report exchanges between related parties and certain conflict-of-interest sales by federal employees under Section 1043.

Any taxpayer who completes a like-kind exchange must file Form 8824. This includes individuals, C corporations, S corporations, partnerships, LLCs taxed as partnerships, trusts, and estates. The IRS instructions on the Form 8824 Instructions page state that you file one Form 8824 for each exchange, although a summary statement is allowed for multi-asset exchanges.

You must file Form 8824 in the tax year the first property in the exchange transfers, not the year you receive the replacement. If your exchange straddles two tax years, which happens often when the 180-day window crosses December 31, you may need to file Form 8824 for the year of the first transfer and report any later boot or failed exchange on an amended return.

The consequence of skipping Form 8824 is severe. The IRS treats the transaction as a fully taxable sale, assesses tax on the entire realized gain, and may add an accuracy-related penalty equal to 20% of the underpayment under IRC §6662. A common misconception is that filing Form 8824 is optional if your qualified intermediary already reported the sale; the IRS clearly disagrees.

Real Property Only After 2017

The Tax Cuts and Jobs Act of 2017 changed Section 1031 dramatically. For exchanges completed after December 31, 2017, only real property held for productive use in a trade or business or for investment qualifies. Personal property like vehicles, equipment, artwork, cryptocurrency, and franchise rights no longer qualifies, as confirmed by the final Treasury regulations.

The consequence is that a contractor swapping bulldozers, a collector trading paintings, or an investor exchanging gold bullion now recognizes the full gain in the year of sale. A real-world example: Maria, a landscaper, traded her old skid-steer for a new one in 2026 and assumed Section 1031 covered it; she now owes ordinary income tax on the full depreciation recapture because personal property exchanges are gone.

A common misconception is that a “primarily real property” mixed exchange still qualifies for personal property; under the final regulations at Treas. Reg. §1.1031(a)-3, only real property is deferred, and any incidental personal property received counts as taxable boot.

Who Cannot Use Form 8824

You cannot file Form 8824 to defer gain on your primary residence, second home used personally, dealer property held primarily for sale (such as flipper inventory), partnership interests, stocks, bonds, notes, or certificates of trust. The IRS Like-Kind Exchanges page lists these exclusions explicitly.

The consequence of trying anyway is total disqualification of the exchange and full gain recognition. Tom, a house flipper, tried to 1031 a rehabbed duplex he held for four months; the IRS reclassified it as inventory under IRC §1221(a)(1) and denied deferral, costing him roughly $42,000 in unexpected tax.

The Section 1031 Rules Behind Form 8824

Before you fill out the form, you must understand the legal framework that controls every line. Section 1031 lets you defer gain — not eliminate it — by rolling your old basis into the new property. The deferred gain stays attached to the replacement property until you sell it in a taxable transaction, at which point you owe tax on the full deferred amount plus any new appreciation.

The 45-Day Identification Rule

You must identify your replacement property in writing within 45 calendar days of transferring the relinquished property, per Treas. Reg. §1.1031(k)-1(c). The 45 days run from the closing date of the old property and include weekends and holidays. There are no extensions except for federally declared disasters under Rev. Proc. 2018-58.

You may identify up to three properties of any value (the Three-Property Rule), or any number of properties whose total fair market value does not exceed 200% of the relinquished property’s value (the 200% Rule), or any number of properties if you actually acquire 95% of their total value (the 95% Rule). Missing the deadline by even one day kills the exchange.

A real-world example: David sold a duplex on March 1, 2026 and identified his replacement on April 16 — day 46. The IRS disqualified the exchange, and David owed federal capital gains tax of $48,000 plus California state tax of roughly $19,000. The common misconception that the QI can extend the 45 days is wrong; only the IRS can, and only for disasters.

The 180-Day Closing Rule

You must close on the replacement property within 180 calendar days of transferring the relinquished property, or by the due date of your tax return (including extensions) for that year, whichever is earlier. This earlier-of rule is in IRC §1031(a)(3). If your relinquished sale closes after October 18, you must file an extension on Form 4868 to preserve your full 180 days.

The consequence of missing the 180-day deadline is the same as missing the 45-day deadline: full gain recognition. Sarah sold a rental on November 15, 2025 and closed her replacement on April 20, 2026 — day 156 — but she did not file an extension and her return was due April 15, so her exchange failed at day 151. The common misconception is that the 180 days always applies; it does not when the tax-return due date hits first.

Qualified Intermediary Requirement

For deferred (Starker) exchanges, you must use a Qualified Intermediary (QI) who holds the sale proceeds and acquires the replacement property on your behalf. You cannot touch the cash, even briefly, or the exchange fails under the constructive receipt doctrine of Treas. Reg. §1.1031(k)-1(f).

Your QI cannot be a disqualified person — that is, your agent, attorney, accountant, real-estate broker, or family member who served you in those roles within the last two years. The Starker v. United States ruling created the deferred-exchange concept, and the QI safe harbor codifies it.

Form 8824 Line-by-Line Walkthrough

Form 8824 has four parts: Part I (Information on the Exchange), Part II (Related Party Exchanges), Part III (Realized Gain or Loss, Recognized Gain, and New Basis), and Part IV (Section 1043 Conflict-of-Interest Sales). Most filers use Parts I and III, plus Part II if a related party is involved.

Part I: Information on the Like-Kind Exchange

Line 1 asks for a description of the like-kind property given up. Use the street address, parcel number, or legal description — not just “rental property.” For example: “Single-family rental at 123 Oak Street, Austin, TX 78701, APN 1234567.”

Line 2 asks for a description of the like-kind property received. Use the same level of specificity. The IRS uses Lines 1 and 2 to verify both legs qualify as real property under Treas. Reg. §1.1031(a)-3.

Line 3 is the date the property given up was originally acquired. This determines your holding period for character (long-term vs. short-term) on any recognized gain.

Line 4 is the date the property given up was actually transferred to the buyer — closing date, not contract date. This date starts both the 45-day and 180-day clocks.

Line 5 is the date you identified the replacement property in writing. The date must be on or before day 45 from Line 4, or you must answer “N/A” because the exchange failed.

Line 6 is the date you actually received the replacement property. The date must be on or before day 180 from Line 4 (or your return due date with extensions, whichever is earlier).

Line 7 asks if the exchange was with a related party. Mark “Yes” or “No.” If yes, you must complete Part II and watch the two-year holding rule.

Part II: Related Party Exchanges

Part II applies when you exchange directly or indirectly with a related party as defined in IRC §267(b) or §707(b)(1) — a spouse, sibling, ancestor, descendant, more-than-50%-owned entity, or related trust. Lines 8 through 10 collect the related party’s name, address, taxpayer ID, and relationship.

Line 11 is the two-year holding test under IRC §1031(f). If either party disposes of the exchanged property within two years, you must recognize the deferred gain in the year of disposition unless one of three exceptions applies: (a) death of either party, (b) involuntary conversion under Section 1033, or (c) you can prove neither the exchange nor the disposition had tax avoidance as a principal purpose.

The consequence of failing the two-year rule is full gain recognition with interest. A common misconception: people assume the two years runs from the exchange date for only their side; it actually runs for both sides, and either party’s early sale triggers gain recognition for both.

A real-world example: Linda exchanged a strip mall with her brother Mark in March 2024. In June 2025, Mark sold the property he received. Both Linda and Mark must report deferred gain on amended 2024 returns and pay back-tax plus interest under IRC §6601.

Part III: Realized Gain or Loss, Recognized Gain, and Basis

Part III is where the math happens. Lines 12–14 are only for multi-asset exchanges where you give up property that is not like-kind (such as cash boot or a note); most filers leave them blank.

Line 15 is the sum of any cash you received, the fair market value of other (not like-kind) property received, plus any net liabilities the other party assumed minus any exchange expenses you paid. This is your boot received. Boot is taxable to the extent of your realized gain.

Line 16 is the fair market value of the like-kind property received.

Line 17 is the sum of Lines 15 and 16 — total consideration received.

Line 18 is the adjusted basis of the property given up plus the cash you paid plus net liabilities you assumed plus exchange expenses (closing costs, QI fees, recording fees) not already deducted on Line 15.

Line 19 is realized gain or loss — Line 17 minus Line 18.

Line 20 is the smaller of Line 15 (boot) or Line 19 (realized gain). Losses are not recognized in a 1031 exchange.

Line 21 is ordinary income from depreciation recapture under IRC §1245 or §1250, which carries over and is reported on Form 4797.

Line 22 subtracts Line 21 from Line 20 to give recognized gain that is not ordinary income.

Line 23 is the total recognized gain (Lines 21 + 22), which flows to Schedule D or Form 4797.

Line 24 is the deferred gain — Line 19 minus Line 23.

Line 25 is the basis of the like-kind property received, calculated as Line 18 minus Line 15 plus Line 23. This carryover basis is the heart of the deferral.

Part IV: Section 1043 Sales

Part IV is only for certain federal employees and judicial officers who sell property to comply with conflict-of-interest rules under IRC §1043. Most taxpayers will never touch Part IV.

Worked Example: A Simple Real Estate Exchange

Carlos owns a rental house with an adjusted basis of $200,000 and a fair market value of $500,000 (no mortgage). He exchanges it through a QI for a small apartment building worth $500,000 (no mortgage). Closing costs are $20,000 split between both legs. He receives no cash boot.

Line 15: $0 (no cash, no other property, no net liability relief)
Line 16: $500,000 (FMV of replacement)
Line 17: $500,000
Line 18: $200,000 + $20,000 = $220,000
Line 19: $500,000 – $220,000 = $280,000 realized gain
Line 20: smaller of $0 or $280,000 = $0 recognized
Line 24: $280,000 deferred
Line 25: $220,000 – $0 + $0 = $220,000 carryover basis

Carlos pays no current federal tax. His new $220,000 basis in the apartment building preserves the $280,000 of gain for a future taxable sale.

Worked Example: Exchange With Cash Boot

Aisha owns a duplex with adjusted basis $150,000 and FMV $400,000. She exchanges it for a triplex worth $360,000 and receives $40,000 cash. Closing costs total $10,000.

Line 15: $40,000 cash boot
Line 16: $360,000
Line 17: $400,000
Line 18: $150,000 + $10,000 = $160,000
Line 19: $400,000 – $160,000 = $240,000 realized gain
Line 20: smaller of $40,000 or $240,000 = $40,000 recognized
Line 23: $40,000 (assume no §1250 recapture for simplicity)
Line 24: $200,000 deferred
Line 25: $160,000 – $40,000 + $40,000 = $160,000 basis

Aisha pays federal long-term capital gains tax of up to 20% on the $40,000, plus the 3.8% Net Investment Income Tax if her income exceeds the threshold.

Worked Example: Mortgage Boot (Debt Relief)

Raj owns an office building with adjusted basis $300,000, FMV $700,000, and a $250,000 mortgage. He exchanges it for a warehouse worth $500,000 with a $50,000 mortgage. He receives no cash. The $200,000 net debt relief is mortgage boot.

Line 15: $200,000 (net liabilities assumed by other party)
Line 16: $500,000
Line 17: $700,000
Line 18: $300,000
Line 19: $400,000 realized gain
Line 20: smaller of $200,000 or $400,000 = $200,000 recognized
Line 25: $300,000 – $200,000 + $200,000 = $300,000 basis

Raj owes tax on $200,000 even though he never touched cash, illustrating why trading down in debt is dangerous. The fix is to bring outside cash to offset the debt relief, which the IRS netting rules allow.

Three Common Scenarios and Their Tax Outcomes

Investor Move	Tax Result
Identifies four properties on day 44, none worth more than the relinquished	Exchange fails because the Three-Property Rule allows only three; full gain recognized
Sells rental and uses proceeds to pay personal credit card before QI deposits funds	Constructive receipt; entire exchange disqualified, gain fully taxable
Trades $1M property with $400K mortgage for $1M property with $400K mortgage and no cash	Successful full deferral; no boot, no recognized gain, basis carries over

Replacement Property Choice	Consequence
Buys vacation cabin used personally 30 weeks per year	Fails investment-intent test; treated as personal use, no deferral
Buys rental held for two-plus years then converts to primary residence	Qualifies, but Section 121 requires 5-year ownership for partial exclusion
Buys property held primarily for resale (flip)	Dealer property, fails 1031, full ordinary income

Timing Decision	Outcome
Closes relinquished property December 1 and replacement May 15 next year	Allowed if extension filed; without extension, deadline is April 15
Identifies on day 45 by email to QI before midnight	Valid identification; written notice need not be on paper
Adds a property to identification list on day 46	Late additions are void; only original list controls

Common Mistakes to Avoid

Touching the sale proceeds. Even one minute of constructive receipt under Treas. Reg. §1.1031(k)-1(f) kills the exchange and triggers full tax.
Identifying property orally. The 45-day identification must be in writing and signed; oral identification is void and the exchange fails.
Trading down in debt without adding cash. Mortgage boot is taxable even with zero cash received, surprising many first-time exchangers.
Using a disqualified intermediary. Hiring your CPA or attorney as QI voids the safe harbor under Treas. Reg. §1.1031(k)-1(k).
Forgetting to file Form 4868 when relinquished closing is after October 18, which shortens the 180-day window.
Misreporting depreciation recapture. Skipping Line 21 and Form 4797 misstates ordinary income and triggers a CP2000 notice.
Assuming personal property qualifies. Post-TCJA, equipment and crypto exchanges fail and produce full taxable gain.
Missing the related-party two-year rule. Selling the received property within two years undoes the deferral retroactively.
Skipping the California FTB Form 3840 annual filing when you exchange California property for out-of-state property.
Filing Form 8824 in the wrong year. File in the year of the first transfer, not the year of replacement closing.

Do’s and Don’ts of Filing Form 8824

Do: – Do hire an experienced QI before listing the relinquished property because last-minute QI hiring often violates the safe harbor. – Do keep dated copies of every identification notice because the IRS routinely audits the 45-day window. – Do reconcile Line 25 basis to your fixed-asset schedule because future depreciation depends on this number. – Do file Form 8824 for each separate exchange because grouping creates audit risk. – Do attach a statement explaining unusual transactions because transparency reduces examiner questions.

Don’t: – Don’t sign closing documents on the relinquished sale until your QI agreement is fully executed because constructive receipt is automatic otherwise. – Don’t identify more than three properties unless you meet the 200% or 95% rule because exceeding the count voids the entire identification. – Don’t ignore state forms like California’s FTB 3840 because state clawback applies even when federal deferral works. – Don’t exchange with related parties without legal advice because IRC §1031(f) traps are easy to miss. – Don’t assume the QI files Form 8824 for you because the taxpayer is solely responsible.

Pros and Cons of Section 1031 Exchanges

Pros: – Deferral of capital gains tax preserves cash for new investment, often boosting compounding returns over decades. – Estate planning benefits arise because heirs get a stepped-up basis at death, eliminating the deferred gain. – Portfolio reallocation across geographies and asset types stays tax-free, enabling strategic moves without tax friction. – Depreciation recapture is also deferred, not just capital gains, which is a major benefit for long-held rentals. – Multiple successive exchanges (the swap-til-you-drop strategy) compound the deferral indefinitely.

Cons: – Strict 45-day and 180-day deadlines leave no room for negotiation delays, often forcing rushed property choices. – QI fees, legal fees, and additional closing costs typically run $1,500–$5,000 per exchange. – Basis carryover means lower future depreciation deductions, slightly reducing annual tax shelter. – State conformity issues, like Pennsylvania’s pre-2023 non-conformity and California’s FTB 3840 clawback, complicate planning. – Failed exchanges produce immediate tax plus loss of QI and legal fees, sometimes exceeding the tax owed on a straight sale.

State Nuances You Cannot Ignore

Most states conform to federal Section 1031 treatment, but several states have unique rules. California requires non-residents and residents who exchange California property for out-of-state property to file FTB Form 3840 every year until the deferred gain is recognized, and failure to file triggers immediate California taxation of the deferred gain.

Oregon, Massachusetts, and Montana have similar clawback mechanisms that recapture state-source gain when the replacement property is sold. Pennsylvania historically did not conform to Section 1031 for personal income tax but conformed for tax years beginning after December 31, 2022, so older Pennsylvania exchanges face different treatment.

The consequence of ignoring state rules is double taxation or unexpected state tax in a year you thought was fully deferred. Jennifer exchanged a San Diego rental for a Texas rental in 2023 and skipped FTB 3840 filings; California sent a 2026 notice assessing tax on the entire deferred gain plus penalties.

Court Rulings That Shaped Form 8824

Starker v. United States, 602 F.2d 1341 (9th Cir. 1979) established that delayed (non-simultaneous) exchanges qualify under Section 1031, leading directly to the QI safe harbor and modern deferred exchanges. Without Starker, today’s 1031 industry would not exist.

Bartell v. Commissioner, 147 T.C. 140 (2016) approved a 17-month parking arrangement reverse exchange that pre-dated Rev. Proc. 2000-37, confirming the IRS’s safe-harbor reverse-exchange procedure as the preferred path. Estate of Bartell shows that exchanges outside the safe harbor can survive but invite litigation.

Teruya Brothers v. Commissioner, 580 F.3d 1038 (9th Cir. 2009) struck down a related-party exchange because the taxpayer used a QI to indirectly cash out a related party, illustrating how IRC §1031(f)(4) anti-abuse rules trap structures that meet the literal statute but fail the spirit.

Reverse and Improvement Exchanges

A reverse exchange lets you acquire the replacement property before selling the relinquished property, using an Exchange Accommodation Titleholder (EAT) under the safe harbor of Rev. Proc. 2000-37. The EAT parks title for up to 180 days while you market the old property. Reverse exchanges cost more (often $7,500–$15,000 in extra fees) but solve hot-market timing problems.

An improvement (or build-to-suit) exchange lets the EAT hold replacement property while improvements are built using exchange funds, before transferring the improved property to you within 180 days. Improvements completed after day 180 do not count toward the like-kind value, which is a frequent and costly mistake.

The consequence of blowing a reverse-exchange deadline is the same as a forward exchange — full gain recognition. Pat used a reverse exchange to buy a Phoenix apartment building before selling his Denver duplex but failed to close the Denver leg by day 180; his entire $600,000 gain became taxable in 2025.

Where Form 8824 Numbers Flow on Your Return

Recognized gain from Line 22 flows to Schedule D (capital gain) or to Form 4797 (Section 1231 gain) depending on holding period and use. Ordinary income recapture from Line 21 flows to Form 4797, Part II, and then to your Form 1040 as ordinary income.

Your new basis on Line 25 becomes the depreciation basis for the replacement property, allocated between land and improvements on Form 4562. Mistakes here cascade for the entire holding period of the new property and are the most-audited consequence of poor 1031 planning.

FAQs

Do I have to file Form 8824 if my exchange was fully deferred and I owe no tax?

Yes. The IRS requires Form 8824 for every like-kind exchange, regardless of whether any gain is recognized, because the form establishes carryover basis and starts the related-party clock.

Can I do a 1031 exchange on my primary residence?

No. Section 1031 applies only to property held for productive use in a trade or business or for investment, not personal-use property like your home.

Does cryptocurrency qualify for like-kind exchange treatment?

No. After the 2017 Tax Cuts and Jobs Act, only real property qualifies, and the IRS confirmed in Chief Counsel Advice 202124008 that crypto never qualified.

Can I receive cash during a 1031 exchange and still defer some gain?

Yes. Cash boot is taxable up to your realized gain, but the rest of the gain is deferred; you simply pay tax on the boot portion and roll the rest forward.

Is there a way to extend the 45-day or 180-day deadline?

Yes, but only through an IRS-issued disaster relief notice under Rev. Proc. 2018-58; private parties and QIs cannot extend either deadline.

Can a partnership do a 1031 exchange and then break up the partnership?

No, not safely without restructuring; the drop-and-swap technique requires careful pre-exchange planning to avoid the partnership-interest exclusion in IRC §1031(a)(2)(D).

Do I need to use a Qualified Intermediary for a simultaneous swap?

No. A truly simultaneous direct exchange does not require a QI, but the practical risk of constructive receipt makes most exchangers use one anyway.

Can I 1031 exchange a U.S. property for a property in Mexico or Canada?

No. IRC §1031(h) blocks U.S. real property from exchanging with foreign real property; foreign-for-foreign is allowed but rare.

Will the deferred gain ever go away?

Yes, when the owner dies, because IRC §1014 gives heirs a stepped-up basis to fair market value, eliminating the entire deferred gain.

Does California tax my deferred gain even if the replacement property is in another state?

Yes, eventually, through the FTB 3840 annual filing requirement and clawback when the replacement property is sold in a taxable transaction.

Can I do unlimited 1031 exchanges in a row?

Yes. The swap-til-you-drop strategy lets investors chain exchanges indefinitely, deferring tax until death, sale, or a non-1031 disposition triggers recognition.

Is there a minimum holding period for 1031 property?

No statutory minimum exists, but the IRS scrutinizes holdings under one year; most practitioners recommend at least 12 to 24 months to demonstrate investment intent.

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