How to Fill Out IRS Form 8824 (Worked Example + Common Mistakes)
14 min read · Planning & Execution · Last updated
Reviewed by
Key Takeaways
Form 8824 is where you report your 1031 exchange to the IRS. Most of the form is straightforward information (property details, identification dates), but the gain calculation requires care. Common mistakes include wrong basis calculations, forgetting depreciation recapture, not reporting when gain is deferred, and incorrect property descriptions. Use our worked example to guide your filing.
Form 8824, "Like-Kind Exchanges," is the IRS form used to report every 1031 exchange. You file it with your federal tax return for the year in which the relinquished property sale closes, even if you recognized zero gain. This page provides a concise line-mapping of the form followed by a single worked example carried all the way through.
Form 8824 line map
| Section | Lines | What it covers |
|---|---|---|
| Part I — Information on the exchange | 1-5 | Descriptions of relinquished and replacement properties, dates of sale and acquisition, identification deadline, exchange deadline, identification rule used |
| Part II — Related party exchanges | 6-10 | Applies only if you bought from or sold to a family member, business partner, or related entity; skip if not applicable |
| Part III — Realized gain, recognized gain, and basis | 12-25 | Sale price, adjusted basis, realized gain, boot received, recognized gain, deferred gain, basis of replacement property |
Part I: what to enter
Line 1 — Description of relinquished property. Use the street address: "123 Main Street, Denver, CO 80202." Add the legal description if available.
Line 2 — Date relinquished property was originally acquired. The date you purchased or received the property.
Line 3 — Date relinquished property was transferred. The closing date of your sale.
Line 4 — Description of replacement property. Street address and legal description.
Line 5 — Date replacement property was identified. The date your written identification was delivered to your QI.
Line 6 — Date replacement property was received. The closing date of your replacement-property purchase.
Line 7 — Was the exchange made with a related party? If yes, complete Part II. If no, skip to Part III.
Identification-rule checkbox. Indicate whether you used the 3-Property Rule, the 200% Rule, or the 95% Rule.
Part III: the gain calculation (line by line)
The numbering below follows the current form. Your CPA handles the calculations, but you should understand each line.
| Line | Label | What to enter |
|---|---|---|
| 12 | Fair market value of replacement property received | Purchase price of your replacement property |
| 13 | Adjusted basis of replacement property (if related party) | Skip unless related party |
| 15 | Net cash received (or paid) | Cash boot received; enter $0 if none |
| 16 | FMV of other (non-like-kind) property received | Personal property received in the exchange, if any |
| 17 | Net liabilities assumed by other party minus net liabilities you assumed | Mortgage boot, if any (old mortgage minus new mortgage, if positive) |
| 18 | Total boot received (sum of 15, 16, 17) | Combined cash, personal property, and mortgage boot |
| 19 | Adjusted basis of relinquished property | Original cost minus accumulated depreciation minus prior adjustments |
| 20 | Realized gain (line 12 + 18 - 19, simplified) | Total gain on the exchange |
| 21 | Recognized gain | Lesser of realized gain (line 20) or total boot (line 18) |
| 24 | Basis of replacement property | Calculated per IRS instructions; generally: replacement FMV minus deferred gain |
Worked example
Facts:
| Item | Value |
|---|---|
| Relinquished property | 123 Main St, Denver, CO — residential rental |
| Date acquired | January 15, 2015 |
| Original cost | $350,000 ($280,000 building, $70,000 land) |
| Depreciation claimed (10 years) | $101,818 (residential: $280,000 / 27.5 years x 10 years) |
| Adjusted basis | $248,182 ($350,000 - $101,818) |
| Sale price | $700,000 |
| Selling costs (commission + closing) | $44,000 |
| Net sale price | $656,000 |
| Old mortgage payoff | $150,000 |
| Net cash to QI | $506,000 |
| QI fee (paid from proceeds) | $1,000 |
| Replacement property | 456 Oak Ave, Denver, CO — residential rental |
| Replacement purchase price | $725,000 |
| New mortgage | $220,000 |
| Cash from QI at replacement closing | $505,000 |
| Replacement closing date | November 10, 2025 (within 180 days) |
Filling out Part I
| Line | Entry |
|---|---|
| 1 (relinquished description) | 123 Main Street, Denver, CO 80202 — residential rental house |
| 2 (date acquired) | 01/15/2015 |
| 3 (date transferred) | 06/01/2025 |
| 4 (replacement description) | 456 Oak Avenue, Denver, CO 80202 — residential rental house |
| 5 (date identified) | 07/01/2025 |
| 6 (date received) | 11/10/2025 |
| 7 (related party?) | No |
| Identification rule | 3-Property Rule |
Filling out Part III
| Line | Calculation | Amount |
|---|---|---|
| 12 — FMV of replacement property | Purchase price | $725,000 |
| 15 — Cash boot received | QI proceeds ($506,000) minus QI fee ($1,000) minus cash used at closing ($505,000) | $0 |
| 16 — Non-like-kind property received | None | $0 |
| 17 — Mortgage boot | Old mortgage ($150,000) minus new mortgage ($220,000) = negative, so $0 | $0 |
| 18 — Total boot | $0 + $0 + $0 | $0 |
| 19 — Adjusted basis of relinquished property | $350,000 - $101,818 | $248,182 |
| 20 — Realized gain | $656,000 net sale price - $248,182 basis | $407,818 |
| 21 — Recognized gain under Sec. 1031 | Lesser of realized gain ($407,818) or boot ($0) | $0 |
| 24 — Basis of replacement property | $725,000 - $407,818 deferred gain | $317,182 |
Result: $0 recognized gain. The full $407,818 gain is deferred. The replacement property starts with a basis of $317,182 for future depreciation calculations.
Depreciation recapture note: The $101,818 in prior depreciation is not separately taxed in this exchange because no gain was recognized. If the investor later sells the replacement property without exchanging, the recapture will be due at that time. Your CPA should track the carried-over depreciation for future reporting.
Common mistakes
1. Wrong adjusted basis. Reporting the original purchase price without subtracting depreciation. If you bought for $350,000 and claimed $101,818 in depreciation, your basis is $248,182, not $350,000. Get a depreciation schedule from your CPA.
2. Not filing when no gain is recognized. Form 8824 is required for every 1031 exchange, including those with zero recognized gain. The form reports the exchange itself, not just the tax owed. Failure to file can trigger IRS inquiries years later.
3. Incorrect boot reporting. Under-reporting cash or mortgage boot. If you received $25,000 in boot, report it accurately on line 18. The IRS cross-references your 1099-S and settlement statements.
4. Vague property descriptions. Use specific street addresses and legal descriptions, not generic labels like "commercial real estate in Denver."
5. Wrong QI information. Confirm the QI's exact legal entity name and EIN from the exchange agreement before filing.
6. Missed deadlines not disclosed. If you missed the 45-day or 180-day deadline, do not file the form as if the exchange succeeded. Work with your CPA to determine the correct treatment.
Documentation to gather before tax time
Relinquished property:
- Original purchase closing statement (date and cost)
- Depreciation schedule showing total depreciation claimed
- Sale closing statement (sale price, commissions, costs, net proceeds)
- Mortgage payoff statement
Replacement property:
- Purchase agreement and closing statement (acquisition date and cost)
- New mortgage documents (loan amount)
- QI final accounting (funds received, disbursed, balance)
Exchange timeline:
- Exchange agreement from QI
- Identification letter with proof of timely delivery
- QI confirmation of all deadlines
QI information:
- Legal entity name and EIN
- Mailing address
Provide all of these to your CPA before they prepare the form. Review the completed draft for accurate property descriptions, dates, and gain calculations before signing.
Calculate your specific numbers to confirm gain and boot before filing. If there is any uncertainty about basis or recapture, consult your CPA or an experienced 1031 advisor.
The Bottom Line
Form 8824 is required whenever you do a 1031 exchange, even if you recognize zero gain. File it with your tax return the year of the exchange. Work with your CPA on the gain calculation and basis detail, but you should understand what the form is reporting and why each line matters. Use our checklist to gather documents before tax time.
Frequently Asked Questions
Related Articles
1031 Exchange Calculator: How to Estimate Your Tax Savings
Most investors hear "capital gains tax" and multiply their gain by 15% or 20%. That captures one of four tax layers. A California investor selling a property with significant depreciation could face an effective rate above 35% when you stack federal capital gains, depreciation recapture at a...
How to Choose a Qualified Intermediary (and What to Watch For)
A QI (also called an accommodator or facilitator) performs four critical functions:
1031 Exchange Into NNN (Triple Net) Property
In a triple-net (NNN) lease, the tenant pays three categories of operating expenses on top of base rent: property taxes, building insurance, and maintenance/repairs. The landlord receives rent and has virtually no operating responsibilities.