Instructions for Form 8824

2025

Instructions for Form 8824

Like-Kind Exchanges

(and section 1043 conflict-of-interest sales)

Section references are to the Internal Revenue Code unless

otherwise noted.

Future Developments

For the latest information about developments related to Form 8824

and its instructions, such as legislation enacted after they were

published, go to IRS.gov/Form8824.

What’s New

Write-in space available for e-filed Form 8824. If you exchanged

real property that is also subject to exclusion of gain under section

121 and you are filing your Form 8824 electronically, there is a space

on line 19 for you to write “Section 121 exclusion” and the amount of

the exclusion, if needed. This space has been available on paper

forms. Don’t reduce line 19 by the amount of the exclusion. See

Line 19 and Property Used as Home, later.

Lines 19 and 20. We added guidance for figuring the amounts to

enter on these lines. See new Line 19 and new Line 20.

Line 25b. If like-kind section 1252, 1254, or 1255 property was

received as part of the exchange, include the basis of those

properties on line 25b. See Lines 25a, 25b, and 25c, later.

Treatment of capital gains from the sale or exchange of qualified farmland property. Section 70437 of Public Law 119-21,

commonly known as the One Big Beautiful Bill Act (OBBBA), adds

new Internal Revenue Code section 1062 allowing taxpayers to elect

to defer the net income tax attributable to the gain on the sale or

exchange of qualified farmland property to a qualified farmer during

the tax year. This treatment is effective for tax years beginning after

July 4, 2025. See Form 1062, Schedule A (Form 1062), and the

Form 1062 and Schedule A instructions when they become

available.

Opportunity zones. Section 70421 of P.L. 119-21 revises certain

Opportunity Zone rules in Internal Revenue Code sections 1400Z-1

and 1400Z-2.

General Instructions

Reminders

Instructions for completing lines 12a, 15a, and 25a through

25c on e-filed Forms 8824. Lines 12a, 15a, and 25a through 25c

have been added to e-filed Forms 8824. E-filers no longer need to

attach a separate sheet providing details for those lines. See No

separate attachment required after 2023 under Line 12a, Line 15a,

and Lines 25, 25a, 25b, and 25c, later.

Exchanges limited to real property. For 2018 and later years,

section 1031 like-kind exchange treatment applies only to

exchanges of real property held for use in a trade or business or for

investment, other than real property held primarily for sale.

Regulations sections 1.1031(a)-1, 1.1031(a)-3, and 1.1031(k)-1

provide a definition of real property under section 1031, address a

taxpayer's receipt of personal property incidental to the like-kind real

property received, and apply to like-kind exchanges after December

2, 2020. See Definition of Real Property, later, for more details.

Special rules for capital gains invested in qualified opportunity

funds (QOFs). Effective December 22, 2017, section 1400Z-2

Dec 2, 2025

introduced a temporary deferral of inclusion in gross income for

capital gains from the investment in QOFs, and permanent exclusion

of capital gains from the sale or exchange of an investment in the

QOF if the investment is held for at least 10 years. See the Form

8949 instructions on how to report your election to defer eligible

gains invested in a QOF.

For additional information (including details on investments in

QOFs held for at least 10 years), see Opportunity zones frequently

asked questions, at IRS.gov.

Qualified opportunity investment. If you are an eligible taxpayer

who held a qualified investment in a QOF at any time during the year,

you must file your tax return with Form 8997, Initial and Annual

Statement of Qualified Opportunity Fund (QOF) Investments,

attached. See the Form 8997 instructions.

Purpose of Form

Use Parts I, II, and III of Form 8824 to report each exchange of

business or investment real property for real property of a like kind.

Form 8824 figures the amount of gain deferred as a result of a

like-kind exchange. Use Part III to figure the amount of gain required

to be reported on the tax return in the current year if cash or property

that isn’t of a like kind is involved in the exchange. Also, use Part III to

figure the basis of the like-kind property received.

Certain members of the executive branch of the federal

government and judicial officers of the federal government use Part

IV to elect to defer gain on conflict-of-interest sales. Judicial officers

of the federal government are the following.

1. Chief Justice of the United States.

2. Associate Justices of the Supreme Court.

3. Judges of the:

a. United States courts of appeals;

b. United States district courts, including the district courts in

Guam, the Northern Mariana Islands, and the Virgin Islands;

c. Court of Appeals for the Federal Circuit;

d. Court of International Trade;

e. Tax Court;

f. Court of Federal Claims;

g. Court of Appeals for Veterans Claims;

h. United States Court of Appeals for the Armed Forces; and

i. Any court created by an Act of Congress, the judges of which

are entitled to hold office during good behavior.

Multiple exchanges. If you made more than one like-kind

exchange, you can file a summary on one Form 8824 and attach

your own statement showing all the information requested on Form

8824 for each exchange. Include your name and identifying number

at the top of each page of the statement. On the summary Form

8824, enter only your name and identifying number in the

appropriate boxes above Part I, “Summary” on line 1, the total

recognized gain from all exchanges on line 23, and the total basis of

all like-kind property received on line 25.

When To File

If during the current tax year you transferred property to another

party in a like-kind exchange, you must file Form 8824 with your tax

return for that year. Also file Form 8824 for the 2 years following the

year of a related party exchange. See Line 7, later, for details.

Instructions for Form 8824 (2025) Catalog Number 12597K

Department of the Treasury Internal Revenue Service www.irs.gov

Like-Kind Exchanges (Form 8824:

Parts I, II, and III)

Section 1031 regulations. Regulations sections 1.1031(a)-1,

1.1031(a)-3, and 1.1031(k)-1 implement statutory changes limiting

the application of section 1031 to exchanges of real property. These

regulations, which apply to like-kind exchanges beginning after

December 2, 2020, provide a definition of real property under

section 1031, and address a taxpayer's receipt of personal property

that is incidental to real property the taxpayer receives in the

exchange.

Generally, if you exchange business or investment real property

solely for business or investment real property of a like kind, section

1031 provides that no gain or loss is recognized. If, as part of the

exchange, you also receive other (non-like-kind) property or money,

gain is recognized to the extent of the other property and money

received, but a loss isn't recognized.

Section 1031 doesn’t apply to exchanges of real property held

primarily for sale. See section 1031(a)(2). In addition, section 1031

doesn't apply to certain exchanges involving tax-exempt use

property subject to a lease. See section 470(e)(4).

Like-kind property. Properties are of like kind if they are of the

same nature or character, even if they differ in grade or quality.

Generally, real properties are like-kind properties, regardless of

whether they are improved or unimproved properties.

Property classified as real property under one of the definitions in

the final regulations discussed above may be like-kind to other real

property defined under another definition in the regulations.

However, real property in the United States and real property

outside the United States aren't like-kind properties. See Pub. 544,

Sales and Other Dispositions of Assets, for more details.

Definition of Real Property

Regulations section 1.1031(a)-3 defines real property as land and

improvements to land, unsevered natural products of the land, and

water and air space superjacent to land. It is further described as

tangible and intangible real property, as discussed later.

Tangible property. Tangible property is real property for purposes

of section 1031 if it meets any of the following.

• On the date it is transferred in an exchange, the property is

classified as real property under the law of the state or local

jurisdiction in which the property is located. See Regulations section

1.1031(a)-3(a)(6) and Intangible property next.

• The property is specifically listed as real property in Regulations

section 1.1031(a)-3. See Stock that is real property, later.

• The property is considered real property based on all the facts

and circumstances under the various factors provided in Regulations

section 1.1031(a)-3(a)(2). See Property affixed to or integrated into

real property, later.

Each distinct asset is separately analyzed from any other distinct

asset to which it relates for purposes of determining whether the

asset is real property under section 1031. See Regulations section

1.1031(a)-3(a)(4).

Intangible property. Intangible property is real property for

purposes of section 1031 if it meets any of the following, subject to

the exceptions provided in Intangible property that is never real

property under section 1031 next.

• On the date it is transferred in an exchange, the property is

classified as real property under the law of the state or local

jurisdiction in which the property is located.

• It is specifically listed in Regulations section 1.1031(a)-3 as real

property.

• It derives its value from real property or an interest in real property

and is inseparable from that real property or interest in real property

(for example, an easement or an option to acquire real property).

See Regulations section 1.1031(a)-3(a)(5).

Intangible property that is never real property under section

1031. The following assets are exceptions and not real property for

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purposes of section 1031, regardless of the classification of the

property under state or local law.

• Stock (other than the type of stock described in Stock that is real

property next), bonds, or notes.

• Other securities or evidences of indebtedness or interest.

• Interests in a partnership (other than an interest in a partnership

that has in effect a valid election under section 761(a) to be excluded

from the application of all of subchapter K).

• Certificates of trust or beneficial interests.

• Choses in action.

Stock that is real property. The following stock is listed in

Regulations section 1.1031(a)-3 as real property for section 1031

purposes.

• Stock in a cooperative housing corporation.

• Shares in a mutual ditch, reservoir, or irrigation company

described in section 501(c)(12)(A) if, at the time of the exchange,

such shares have been recognized by the highest court of the state

in which the company was organized, or by a state statute, as

constituting or representing real property or an interest in real

property.

Property affixed to or integrated into real property. If tangible

property is permanently affixed to real property and will ordinarily

remain affixed for an indefinite period of time, the property is

generally an inherently permanent structure and real property for

section 1031 purposes, regardless of the use or purpose of the

property or whether it contributes to the production of income. In

addition, a structural component is real property for section 1031

purposes if it is a constituent part of, and integrated into, an

inherently permanent structure, regardless of whether the structural

component contributes to the production of income. For example,

items of machinery or equipment are real property for like-kind

exchange purposes if they comprise an inherently permanent

structure, a structural component of an inherently permanent

structure, or are classified as real property under state or local law.

Deferred Exchanges

A deferred exchange occurs when, based on an agreement, the

property received in the exchange is received after the transfer of the

property given up. For real property associated with a deferred

exchange to qualify as like kind, you must comply with the timing

requirements for identification and receipt of replacement property.

The replacement property for the exchange must be identified within

45 days after the property being given up is transferred. The

replacement property must be received within 180 days, or by the

due date of your tax return (including extensions), whichever is

earlier. See Line 5 and Line 6, later, for more details.

If you make a deferred exchange using a qualified intermediary

(QI), the transfer of the property given up and receipt of like-kind

property is treated as a like-kind exchange. If you fail to meet the

timing requirements because of the QI, your transaction won't qualify

as a deferred exchange and any gain may be taxable in the year you

transferred the property. However, if the QI defaults on its obligation

to acquire and transfer replacement property because of bankruptcy

or receivership proceedings and you meet certain requirements, you

may be able to report the gain in the year or years payments are

received. For the requirements, see Revenue Procedure 2010-14,

2010-12 I.R.B. 456, available at IRS.gov/irb/

2010-12_IRB#RP-2010-14. Related parties and agents of the

taxpayer aren’t eligible to be QIs, and are referred to as “disqualified

persons.” For more information on QIs and disqualified persons, see

Pub. 544, chapter 1.

Safe harbors. The QI exchange constitutes one safe harbor. For

details on QI exchanges and for a discussion of other safe harbors,

see Pub. 544.

Incidental personal property. For deferred like-kind exchanges

involving a QI, personal property that is incidental to replacement

real property (incidental personal property) is disregarded in

determining whether a taxpayer's rights to receive, pledge, borrow,

or otherwise obtain the benefits of money or non-like-kind property

2025 Instructions for Form 8824

held by the QI are expressly limited, as provided in Regulations

section 1.1031(k)-1(g)(6) and (7).

Personal property is incidental to real property acquired in an

exchange if:

• In standard commercial transactions, the personal property is

typically transferred together with the real property; and

• The aggregate fair market value (FMV) of the incidental personal

property transferred with the real property doesn’t exceed 15% of the

aggregate FMV of the replacement real property or properties

received in the exchange (15% limitation). See Regulations section

1.1031(k)-1(g)(7).

a. Line 15 minus the exclusion, or

b. Line 19.

Don't enter less than zero.

3. Subtract line 15 from the sum of lines 18 and 23. Add the

amount of your exclusion to the result. Enter that sum on line 25.

Exchange with a related party. Special rules limit nonrecognition

for an exchange with a related party. See Line 7, later.

Property used partly as home. If the property given up was used

partly as a main home, and partly for business or investment, you will

need to use two separate Forms 8824 as worksheets. Use one

worksheet for the part of the property used as a main home, and the

other worksheet for the part used for business or investment. Fill out

only lines 15 through 25 of each worksheet Form 8824. On the

worksheet Form 8824 for the part of the property used as a main

home, follow steps 1 through 3 above, except that instead of

following step 2, enter the amount from line 19 on line 20. On the

worksheet Form 8824 for the part of the property used for business

or investment, follow steps 1 through 3 above only if you can exclude

at least part of any gain from the exchange of that part of the

property; otherwise, complete the form according to its instructions.

Enter the combined amounts from lines 15 through 25 of both

worksheet Forms 8824 on the Form 8824 you file. Don't file either

worksheet with Form 8824.

More information. For details, see Revenue Procedure 2005-14,

2005-7 I.R.B. 528, available at IRS.gov/irb/

2005-07_IRB#RP-2005-14.

Multi-Asset Exchanges

A multi-asset exchange involves the transfer and receipt of more

than one group of like-kind properties. The transfer or receipt of

multiple properties within one like-kind group is also a multi-asset

exchange. However, an exchange of a single piece of land, a

vehicle, and cash for a single piece of land and a vehicle isn’t a

multi-asset exchange because, of the assets transferred, section

1031 may apply only to the exchange of the land for other land.

Special rules apply when figuring the amount of gain recognized and

your basis in properties received in a multi-asset exchange. For

details, see Regulations section 1.1031(j)-1.

Reporting of multi-asset exchanges. If you transferred and

received (a) more than one group of like-kind properties, or (b) cash

or other (non-like-kind) property, don't complete lines 12 through 18

of Form 8824. Instead, attach your own statement showing how you

figured the realized and recognized gain, and enter the correct

amount on lines 19 through 25. Report any recognized gains on your

Schedule D (Form 1040); Form 4797, Sales of Business Property; or

Form 6252, Installment Sale Income, whichever applies.

Exchanges Using a Qualified Exchange

Accommodation Arrangement (QEAA)

If property is transferred to an exchange accommodation titleholder

(EAT) and held in a QEAA, the EAT may be treated as the beneficial

owner of the property, the property transferred from the EAT to you

may be treated as property you received in an exchange, and the

property you transferred to the EAT may be treated as property you

gave up in an exchange. This may be true even if the property you

are to receive is transferred to the EAT before you transfer the

property you are giving up. However, the property transferred to you

can't be treated as property received in an exchange if you

previously owned it within 180 days of its transfer to the EAT. For

details, see Revenue Procedure 2000-37, as modified by Revenue

Procedure 2004-51. Revenue Procedure 2000-37 is on page 308 of

Internal Revenue Bulletin 2000-40 at IRS.gov/pub/irs-irbs/

irb00-40.pdf. Revenue Procedure 2004-51, 2004-33 I.R.B. 294, is

available at IRS.gov/irb/2004-33_IRB#RP-2004-51.

Property Used as Home

Section 1031 doesn't apply to your exchange of real property if the

property you gave up was used solely as your personal residence at

the time of the exchange. However, if the property you gave up was

owned and used as your main home for at least a total of 2 years

during the 5-year period ending on the date of the exchange, section

121 may allow you to exclude part or all of any gain figured on Form

8824. Section 121 doesn’t require the property you gave up to be

your principal residence on the sale or exchange date.

For details on the section 121 exclusion of gain (including how to

figure the amount of the exclusion), see Pub. 523, Selling Your

Home. Fill out Form 8824 according to its instructions, with the

following exceptions.

1. Subtract line 18 from line 17. Enter that result on line 19. In

the entry space on line 19, enter “Section 121 exclusion” and the

amount of the exclusion.

2. On line 20, enter the smaller of:

2025 Instructions for Form 8824

Report, on line 15a, a description of the other (non-like-kind)

property received. If applicable, the total FMV reported on line 25 is

further allocated on lines 25a, 25b, and 25c, based on section 1250

property, sections 1245, 1252, 1254, and 1255 property, or

intangible real property received in the exchange, respectively.

Additional Information

For more information on like-kind exchanges, see section 1031, its

regulations, and Pub. 544.

Specific Instructions

Lines 1 and 2. Generally, only real property should be described on

lines 1 and 2, including intangible property that is treated as real

property for like-kind exchange purposes. Enter the address and

type of property. For property that is treated as real property for

like-kind exchange purposes, but doesn’t have an address, enter a

short description. If the property described on line 1 or line 2 is real

property located outside the United States, indicate the country.

Line 5. Enter on line 5 the date of the written identification of the

like-kind property you received in a deferred exchange. To comply

with the 45-day written identification requirement, the following

conditions must be met.

1. The like-kind property you receive in a deferred exchange is

designated in writing as replacement property either in a document

you signed or in a written agreement signed by all parties to the

exchange.

2. The document or agreement describes the replacement

property in a clear and recognizable manner. Real property should

be described using a legal description, street address, or

distinguishable name (for example, “Mayfair Apartment Building”).

3. No later than 45 days after the date you transferred the

property you gave up:

a. You fax, hand deliver, mail, or otherwise send the document

you signed to the person required to transfer the replacement

property to you (including a disqualified person) or to another person

involved in the exchange (other than a disqualified person); or

b. All parties to the exchange sign the written agreement

designating the replacement property.

Generally, a disqualified person is either your agent at the time of

the transaction or a person related to you. For more details, see

Regulations section 1.1031(k)-1(k). For more information on related

3

persons, see Line 7, later. Also, see details on disqualified persons

in Pub. 544.

Note: If you received the replacement property before the end of the

45-day period, you are automatically treated as having met the

45-day written identification requirement. In this case, enter on line 5

the date you received the replacement property.

Line 6. Enter on line 6 the date you received the like-kind property

from the other party.

The property must be received by the earlier of the following

dates.

• The 180th day after the date you transferred the property given up

in the exchange.

• The due date (including extensions) of your tax return for the year

in which you transferred the property given up.

Line 7. Special rules apply to like-kind exchanges made with

related parties, either directly or indirectly. A related party includes

your spouse, child, grandchild, parent, grandparent, brother, sister,

or a related corporation, S corporation, partnership, trust, estate, or

tax-exempt organization. See section 1031(f).

An exchange made indirectly with a related party includes:

• An exchange made with a related party through an intermediary

(such as a QI or an EAT, as defined in Pub. 544); or

• An exchange made by a disregarded entity (such as a

single-member limited liability company) if you or a related party

owned that entity.

An exchange structured to avoid the related party rules isn't a

like-kind exchange. Don't report it on Form 8824. Instead, you

should report the disposition of the property given up as if the

exchange had been a sale. See section 1031(f)(4). Such an

exchange includes the transfer of property you gave up to a QI in

exchange for property you received that was formerly owned by a

related party if the related party received cash or other

(non-like-kind) property for the property you received, and you used

the QI to avoid the application of the related party rules. See

Revenue Ruling 2002-83 for more details. You can find Revenue

Ruling 2002-83 on page 927 of Internal Revenue Bulletin 2002-49 at

IRS.gov/pub/irs-irbs/irb02-49.pdf.

If you meet one of the exceptions on line 11, and you or the

related party (either directly or indirectly) dispose of property

received in an exchange before the date that is 2 years after the last

transfer that was part of the exchange, the deferred gain or (loss)

from line 24 must be reported on your tax return for the year of

disposition (unless an exception on Form 8824, line 11, applies).

If you are filing this form for 1 of the 2 years following the year of

the exchange, complete Parts I and II. If both lines 9 and 10 are “No,”

stop. You don't have to complete Part III.

If either line 9 or line 10 is “Yes,” and an exception on line 11

applies, check the applicable box on line 11, attach any required

explanation, and stop. If none of the exceptions on line 11 apply,

complete Part III. Report the deferred gain or (loss) from line 24 on

this year's tax return as if the exchange had been a sale.

Replacement property previously owned by a related party.

If, after the exchange, you own replacement property that a related

party sold into the exchange for cash, or other (non-like-kind)

property, through an unrelated party such as a QI, don’t report the

transaction on Form 8824 unless one of the exceptions on line 11

applies. Instead, report the disposition of the property given up as if

the exchange had been a sale.

Tolling of holding period. The running of the 2-year holding

period will be tolled for any period during which your risk of loss is

substantially reduced. See Two-year holding period in Pub. 544.

Lines 11a through 11c. The line 11 exceptions are in Form 8824

on lines 11a through 11c. These are the exceptions.

• Line 11a. The disposition was after the death of either party.

• Line 11b. The disposition was an involuntary conversion, and the

threat of conversion occurred after the exchange.

• Line 11c. You can establish to the satisfaction of the IRS that

neither the disposition nor the exchange had tax avoidance as one

of its principal purposes.

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Line 11c. If you believe that you can establish to the satisfaction

of the IRS that tax avoidance wasn’t a principal purpose of both the

exchange and the disposition, attach an explanation. Generally, tax

avoidance won't be seen as a principal purpose in the case of:

• A disposition of property in a nonrecognition transaction,

• An exchange in which the related parties derive no tax advantage

from the shifting of basis between the exchanged properties, or

• An exchange of undivided interests in different properties that

results in each related party holding either the entire interest in a

single property or a larger undivided interest in any of the properties.

Lines 12, 12a, 13, and 14. Lines 12 and 12a should be completed

if other property that doesn't qualify as like-kind property was part of

the exchange, in addition to the like-kind property. On line 12, enter

the FMV of the other (non-like-kind) property that was given up.

Line 12a. On line 12a, enter a description of the other

(non-like-kind) property given up.

No separate attachment required after 2023. Beginning with

the 2024 Form 8824, e-filers will not attach a separate sheet to their

Form 8824 with the information for lines 12a, 15a, and 25a through

25c. Those lines are now on their e-filed Form 8824 and should be

completed on the form itself.

Line 13. On line 13, enter the adjusted basis of the other property

given up.

Line 14. The gain or (loss) from the other property given up is

figured on line 14 and must be reported on your tax return. Report

gain or (loss) as if the exchange were a sale.

Lines 15 and 15a. Include on line 15 the sum of:

• Any cash paid to you by the other party;

• The FMV of other (non-like-kind) property you received, if any;

and

• Net liabilities assumed by the other party—the excess, if any, of

liabilities (including mortgages) assumed by the other party over the

total of (a) any liabilities you assumed, (b) cash you paid to the other

party, and (c) the FMV of the other (non-like-kind) property you gave

up.

Reduce the sum of the above amounts (but not below zero) by

any exchange expenses you incurred.

The following rules apply in determining the amount of liability

treated as assumed.

• A recourse liability (or portion thereof) is treated as assumed by

the party receiving the property if that party has agreed to and is

expected to satisfy the liability (or portion thereof). It doesn't matter

whether the party transferring the property has been relieved of the

liability.

• A nonrecourse liability is generally treated as assumed by the

party receiving the property subject to the liability. However, if an

owner of other assets subject to the same liability agrees with the

party receiving the property to, and is expected to, satisfy part or all

of the liability, the amount treated as assumed is reduced by the

smaller of (a) the amount of the liability that the owner of the other

assets has agreed to and is expected to satisfy, or (b) the FMV of

those other assets.

Line 15a. On line 15a, enter a description of the other

(non-like-kind) property received.

No separate attachment required after 2023. Beginning with

the 2024 Form 8824, e-filers will not attach a separate sheet to their

Form 8824 with the information for lines 12a, 15a, and 25a through

25c. Those lines are now on their e-filed Form 8824 and should be

completed on the form itself.

Line 18. Include on line 18 the sum of:

• The adjusted basis of the like-kind real property you gave up;

• Exchange expenses, if any (except for expenses used to reduce

the amount reported on line 15); and

• The net amount paid to the other party—the excess, if any, of the

total of (a) any liabilities you assumed, (b) cash you paid to the other

party, and (c) the FMV of the other (non-like-kind) property you gave

up over any liabilities assumed by the other party.

Line 19. If filing Form 8824 electronically, space to write both

“Section 121 exclusion” and the amount of the exclusion is available

if needed. This option was always available on Forms 8824 filed on

2025 Instructions for Form 8824

paper. Don’t reduce the amount on line 19 by the amount of the

exclusion. See Property Used as Home, earlier, for how to figure

your gain when you can claim a section 121 exclusion.

Line 20. Generally, enter the smaller of line 15 or line 19, but not

less than zero. However, if the property you gave up in the exchange

was property used as your principal residence for any period and

you are excluding gain under section 121, see Property Used as

Home, earlier, for special rules to figure the amount to enter on

line 20.

Figuring amounts for lines 15 through 20. See Regulations

section 1.1031(d)-2 and the following example for figuring amounts

to enter on lines 15 through 20.

Example. Taylor owns an apartment building with an FMV of

$220,000, with an adjusted basis of $100,000, and that is subject to

a mortgage of $80,000. Finley owns an apartment building with an

FMV of $250,000, with an adjusted basis of $175,000, and that is

subject to a mortgage of $150,000.

Taylor transfers Taylor’s apartment building to Finley and receives

in exchange Finley's apartment building plus $40,000 cash. Taylor

assumes the mortgage on the apartment building received from

Finley, and Finley assumes the mortgage on the apartment building

received from Taylor.

Summary of Facts

FMV – Real Property

Adjusted Basis

Mortgage

Cash

Taylor Property

$220,000

$100,000

$80,000

$0

Finley Property

$250,000

$175,000

$150,000

$40,000

Taylor files a Form 8824. Taylor enters on line 15 of the Form

8824 only the $40,000 cash received from Finley, and, on line 15a,

enters the description of the other (non-like-kind) property received

as “cash.” The $80,000 of liabilities assumed by Finley isn't included

because it doesn't exceed the $150,000 of liabilities Taylor assumed.

Taylor enters $250,000 on line 16, the FMV of the apartment building

received from Finley. Taylor enters $290,000 on line 17, the sum of

lines 15 and 16. Taylor enters $170,000 on line 18—the $100,000

adjusted basis, plus the $70,000 excess of the liabilities Taylor

assumed over the liabilities assumed by Finley ($150,000 $80,000). Taylor subtracts line 18 from line 17 and enters the

$120,000 gain realized on the exchange on line 19. Taylor enters

$40,000 on line 20, the lesser of line 15 or line 19.

Finley files a Form 8824. Finley enters $30,000 on Finley’s Form

8824, line 15—the excess of the $150,000 of liabilities assumed by

Taylor, over the sum of the $80,000 of liabilities assumed from Taylor

and the $40,000 cash Finley paid Taylor ($120,000). On line 15a,

Finley writes “liabilities and cash.” Finley enters $220,000 on line 16,

the FMV of the apartment building received from Taylor. Finley

enters $250,000 on line 17, the sum of lines 15 and 16. Finley enters

on line 18 only the adjusted basis of $175,000, because the total of

the $80,000 of liabilities Finley assumed from Taylor and the $40,000

cash Finley paid Taylor doesn't exceed the $150,000 of liabilities

assumed by Taylor. Finley subtracts line 18 from line 17 and enters

the $75,000 in gain realized on line 19. Finley enters $30,000 on

line 20, the lesser of line 15 or line 19.

Line 21. If you disposed of section 1245, 1250, 1252, 1254, or 1255

property (see the instructions for Part III of Form 4797), you may be

required to recapture as ordinary income part or all of the realized

gain (line 19). Figure the amount to enter on line 21 as follows.

Section 1245 real property. Enter the smaller of:

1. The total adjustments for deductions (whether for the same

or other property) allowed or allowable to you or any other person for

depreciation or amortization (up to the amount of gain shown on

line 19); or

2. The gain shown on line 20, if any, plus the FMV of

non-section 1245 like-kind property received.

Section 1250 property. Enter the smaller of:

2025 Instructions for Form 8824

1. The gain you would have had to report as ordinary income

because of additional depreciation if you had sold the property (see

the Form 4797 instructions for line 26); or

2. The larger of:

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

b. The excess, if any, of the gain in (1) above over the FMV of

the section 1250 property received.

Section 1252, 1254, and 1255 property. The rules for these

types of property are similar to those for section 1245 property. See

Regulations sections 1.1252-2(d) and 1.1254-2(d) and Temporary

Regulations section 16A.1255-2(c) for details.

If the installment method applies to this exchange:

1. See section 453(f)(6) to determine the installment sale

income taxable for this year and report it on Form 6252;

2. Enter on Form 6252, line 25 or 36, the section 1252, 1254, or

1255 recapture amount you figured on Form 8824, line 21—don't

enter more than the amount shown on Form 6252, line 24 or 35;

3. Also enter this amount on Form 4797, line 15; and

4. If all the ordinary income isn't recaptured this year, report in

future years on Form 6252 the ordinary income up to the taxable

installment sale income, until it is all reported.

Line 22. Report a gain from the exchange of property used in a

trade or business (and other noncapital assets) on Form 4797, line 5

or line 16. Report a gain from the exchange of capital assets

according to the Schedule D (Form 1040) instructions for your tax

return. Be sure to use the date of the exchange as the date for

reporting the gain. If the installment method applies to this

exchange, see section 453(f)(6) to determine the installment sale

income taxable for this year and report it on Form 6252.

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

the amount on line 23 from the amount on line 19 and enter the

result. For exchanges with related parties, see Line 7, earlier.

Figuring amounts for lines 21 through 24. See the following

example for figuring the amounts to enter on lines 21 through 24.

Example. In addition to the facts in the example for lines 15

through 20, assume that Taylor previously allocated a portion of the

basis in Taylor’s apartment building for depreciation purposes under

section 168 to assets that are section 1245 property. Applying

section 1.1031(a)-3 of the regulations, Taylor determines that the

section 1245 real property assets have an FMV of $55,000, a cost

basis of $35,000, and an adjusted basis of zero. The section 1245

property is real property for section 1031 like-kind exchange

treatment. The total depreciation allowed or allowable on the section

1245 property is $35,000. All of the property Taylor received from

Finley is section 1250 property. The section 1245(a)(1) ordinary

income recapture amount is $35,000 (the lesser of the property's

depreciable basis of $35,000 or the amount realized of $55,000).

Summary of Facts

FMV - Real Property

Adjusted Basis Real

Property

FMV - 1245 Real Property

Basis - 1245 Property

Adjusted Basis - 1245

Property

FMV - 1250 Property

Mortgage

Cash

Taylor Property

$220,000

$100,000

Finley Property

$250,000

$175,000

$55,000

$35,000

$0

$0

$0

$165,000

$80,000

$0

$0

$250,000

$150,000

$40,000

Taylor enters $35,000 on line 21 as ordinary income under the

section 1245(b)(4) recapture rules, the lesser of the $35,000 of

section 1245(a)(1) ordinary income recapture or the Line 20 gain of

$40,000 plus the FMV of non-section 1245 property acquired of

$250,000, which is $290,000. Taylor subtracts line 21 from line 20

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and enters $5,000 on line 22. Taylor enters the sum of lines 21 and

22, $40,000, on line 23. Taylor subtracts line 23 from line 19 and

enters the deferred gain on the exchange, $80,000, on line 24.

Alternatively, assume that Taylor's section 1245 assets had a

basis and allowed or allowable depreciation of $50,000 instead of

$35,000. The section 1245(a)(1) ordinary income recapture amount

is $50,000 (the lesser of the property’s depreciable basis of $50,000,

or the amount realized of $55,000). Taylor enters the lesser of the

$50,000 section 1245(a)(1) ordinary income recapture, or $290,000

(the gain recognized of $40,000 plus the $250,000 FMV of

non-section 1245 property received) on line 21, as ordinary income

of $50,000. Taylor subtracts line 21 from line 20 and enters $0 on

line 22. Taylor enters the sum of lines 21 and 22, $50,000, on line 23.

Taylor subtracts line 23 from line 19 and enters the deferred gain on

the exchange, $70,000, on line 24.

Section 1245(b)(4) recapture is the lesser of:

1. $50,000 (Section 1245(a)(1) recapture on Taylor’s Property), or

2. $290,000, which is the total of 2a and 2b below

2a. $40,000 (Gain Recognized)

2b. $250,000 (FMV non-section 1245 property received).

Assume that Finley previously allocated $50,000 of the basis in

Finley’s apartment building to section 1250 qualified improvement

property and determines that the section 1250 assets have a fair

market value of $50,000 and adjusted basis of zero. The total

depreciation that would have been allowable on the straight-line

method for the section 1250 property is $15,000, so the excess

$35,000 in depreciation taken over the straight-line depreciation is

Finley’s section 1250(a)(1)(A) recapture amount. Finley computes

the section 1250(d)(4)(A) recapture limit as the greater of the gain

recognized on line 20 of $30,000, and $0 (the section 1250(a)(1)(A)

recapture amount of $35,000 less the FMV of section 1250 property

received of $165,000). Finley enters $30,000 on line 21 as ordinary

income, the lesser of the $35,000 of section 1250(a)(1)(A) recapture

or the section 1250(d)(4)(A) recapture limit of $30,000. Finley

subtracts line 21 from line 20 and enters $0 on line 22. Finley enters

$30,000 on line 23, the sum of lines 21 and 22. Finley subtracts

line 23 from line 19 and enters the deferred gain on the exchange,

$45,000, on line 24.

Section 1250 recapture is the lesser of:

1. $35,000 (Section 1250(a)(1)(A) recapture on Finley’s property), or

2. $30,000 (Section 1250(d)(4)(A) recapture limit, which is the greater

of 2a or 2b below).

2a. $30,000 (Gain recognized on the exchange), or

2b. $0: ($35,000 (Section 1250(a)(1)(A) recapture) reduced, but

not below zero, by $165,000 (FMV Section 1250 property

received)).

Lines 25, 25a, 25b, and 25c. The amount on line 25 is your basis

in the like-kind property you received in the exchange. Your basis in

other property (non-like-kind) received in the exchange, if any, is its

FMV.

However, if the property you gave up in the exchange was

property used as your principal residence for any period and you are

excluding gain under section 121, see Property Used as Home,

earlier, for special rules to figure the amount to report on line 25.

Lines 25a, 25b, and 25c. If you received section 1250 property,

section 1245, 1252, 1254, or 1255 property, and/or intangible

property that is like-kind property in the exchange, you must

complete lines 25a, 25b, and/or 25c, whichever are applicable.

• On line 25a, enter the amount from line 25 that is allocated to the

like-kind section 1250 property received in the exchange.

• On line 25b, enter the amount from line 25 that is allocated to the

like-kind section 1245, 1252, 1254, and 1255 property received in

the exchange.

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• On line 25c, enter the amount from line 25 that is allocated to the

like-kind intangible property received in the exchange.

Amounts entered on lines 25a, 25b, and 25c must be

proportionate to their FMVs.

No separate attachment required after 2023. Beginning with

the 2024 Form 8824, e-filers will not attach a separate sheet to their

Form 8824 with the information for lines 12a, 15a, and 25a through

25c. Those lines are now on their e-filed Form 8824 and should be

completed on the form itself.

Example. Referring to the facts in the examples for lines 15

through 24, Taylor determines the apartment building received from

Finley contains only like-kind section 1250 property and no section

1245, 1252, 1254, or 1255 property and no intangible property

treated as section 1031 like-kind property.

Summary of Facts

FMV - 1250 Real Property

FMV - 1245 Real Property

Basis - 1245 Property

Adjusted Basis - 1245

Property

Mortgage

Cash

Taylor Property

$165,000

$55,000

$35,000

Finley Property

$250,000

$0

$0

$0

$80,000

$0

$0

$150,000

$40,000

Taylor subtracts line 15 from the sum of lines 18 and 23 and enters

$170,000 on line 25. Taylor allocates the entire $170,000 to the

basis of the like-kind section 1250 property received in the

exchange. Taylor completes a Form 8824. Taylor reports the

$170,000 on line 25a. See Regulations sections 1.1245-5(a)(1) and

1.1250-3(d)(4).

Like Taylor, Finley also files a Form 8824. Finley determines that

the apartment building received from Taylor with an FMV of

$220,000 contains like-kind section 1245 property with an FMV of

$55,000, and like-kind section 1250 property with an FMV of

$165,000. Finley enters $175,000 on line 25, the sum of lines 18 and

23 less line 15. Finley allocates $131,250 ($165,000/$220,000 ×

$175,000) from line 25 to the basis of the like-kind section 1250

property received in the exchange. Finley allocates $43,750

($55,000/$220,000 × $175,000) from line 25 to the basis of the

like-kind section 1245 property received in the exchange. Finley

reports $131,250 as the amount for line 25a and $43,750 as the

amount for line 25b. As noted in the above example, Finley’s

remaining $5,000 in potential section 1250 depreciation recapture

attaches to the apartment building received by Finley from Taylor,

and $5,000 of any gain recognized on the subsequent sale of this

property is recognized as ordinary income.

Section 1043 Conflict-of-Interest

Sales (Part IV)

If you, as an eligible person, sell property at a gain according to a

certificate of divestiture issued by the Office of Government Ethics

(OGE) or the Judicial Conference of the United States (or its

designee) and purchase replacement property (permitted property),

you can elect to defer part or all of the realized gain. You must

recognize gain on the sale only to the extent that the amount realized

on the sale is more than the cost of replacement property purchased

during the 60-day period beginning on the date of such sale. (You

must also recognize any ordinary income recapture.) Permitted

property is any obligation of the United States or any diversified

investment fund approved by the OGE. “Eligible persons” includes

an officer or employee of the executive branch, or a judicial officer of

the federal government, but not a special government employee

defined in 18 U.S.C. section 202. “Eligible persons” also includes

any spouse, minor, or dependent child whose ownership of any

property is attributable to such an officer or employee.

Complete Part IV of Form 8824 only if the cost of the replacement

property is more than the basis of the divested property and you

elect to defer the gain. Otherwise, report the sale on your

Schedule D (Form 1040) or Form 4797, whichever applies.

2025 Instructions for Form 8824

Your basis in the replacement property is reduced by the amount

of the deferred gain. If you made more than one purchase of

replacement property, reduce your basis in the replacement property

in the order you acquired it.

Stock acquired through a statutory stock option. If the property

you sold was stock you acquired by exercising a statutory stock

option, you may be treated as meeting the holding period

requirements that apply to such stock, regardless of how long you

actually held the stock. This may benefit you if you don’t defer your

entire gain, because it may allow you to treat the gain as a capital

gain instead of ordinary income. For details, see section 421(d) or

Pub. 525, Taxable and Nontaxable Income.

Line 30. Enter the amount you received from the sale of the

divested property, minus any selling expenses.

Line 35. Follow these steps to determine the amount to enter.

1. Use Part III of Form 4797 as a worksheet to figure ordinary

income under the recapture rules.

2. Enter on Form 8824, line 35, the amount from Form 4797,

line 31. Don't attach the Form 4797 used as a worksheet to your tax

return.

3. Report the amount from line 35 on Form 4797, line 10, in

column (g). In column (a), enter “From Form 8824, line 35.” Don't

complete columns (b) through (f).

Line 36. If you sold a capital asset, enter any capital gain from

line 36 on your Schedule D (Form 1040). If you sold property used in

a trade or business (or any other asset for which the gain is treated

2025 Instructions for Form 8824

as ordinary income), report the gain on Form 4797, line 2 or line 10,

in column (g). In column (a), write “From Form 8824, line 36.” Don't

complete columns (b) through (f). If you held a qualified investment

in a QOF at any time during the year, you must file your tax return

with Form 8997 attached. See the Form 8997 instructions.

Paperwork Reduction Act Notice. We ask for you to obtain the

information on this form to carry out the Internal Revenue laws of the

United States. You are required to obtain this information. You are

not required to obtain the information requested on a form that is

subject to the Paperwork Reduction Act unless the form displays a

valid OMB control number. Books or records relating to a form, or its

instructions must be retained as long as their contents may become

material in the administration of any Internal Revenue law. Generally,

tax returns and return information are confidential, as required by

Internal Revenue Code section 6103.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated burden for

individual filers is approved under OMB control number 1545-0074;

tax exempt filers is approved under OMB control number 1545-0047;

business filers is approved under OMB control number 1545-0123;

and trust filers is approved under OMB control number 1545-0092.

For the estimated averages, see the instructions for your income tax

return. If you have comments concerning the accuracy of these time

estimates or suggestions for making this form simpler, we would be

happy to hear from you. See the instructions for the tax return with

which this form is filed.

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