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Whether you’re an experienced do-it-yourselfer or doing your own taxes for the first time, this is your place to learn and share. Here you’ll find information and resources for using H&R Block’s online and software DIY solutions. You’ll also find links to more information to assist you on your DIY journey.

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Trusted Pioneer
Posts: 5
Registered: ‎08-10-2014

1031 Exchange Block program confusing about Basis and form 4797

Hello

I made an exchange of my rental duplex using an exchange intermediary in Oct 2016.  I took 50k as ernest money on the sale and the balance went to the intermediary to settle the purchase of the replacement property in Dec 2016.  The replacement property did not use all the proceeds of the sale but I did not receive any other money or value 2016.  The intermediary still has the balance remaining now in 2017.

 

The program interview has me wondering about what to do with the section 179 depreciation I took.  It seems to want me to lump it in with regular depreciation to figure Net Basis for relinquished property.  Isn't this supposed to be separately treated to recapture as ordinary income?  And where in that 8824 form do I enter the amount paid for the replacement property?

 

Then later in the interview I'm asked did I sell any property for a long term gain and if so to fill out the extremely complicated form4797.  It is unclear what basis I'm supposed to use, the full amount of the sale?  And again, no place to enter the Sect179 "depreciation".  Is that correct?

 

Here's what I think I need to do.  I got $50k which I did not return to the exchange so that's a gain.  That 50k should report on the 4797 and be proportioned (ugh) into land and building.  The depreciation should be proportioned to that building part of that 50k.  Complicated!  When I just went by the interview it doubled my tax, that just did not seem right!