2016 Form 8824. Like-Kind Exchanges (and section 1043 conflict-of-interest sales)-2025

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A partnership, however, may exchange real property under 1031, as long as the partnership meets the requirements that apply to all exchange transactions (i.e., same taxpayer starting and completing the exchange, both the Relinquished and Replacement Properties will be held for investment or business purposes, etc.).
What happens if I do not file Form 8824? There are no penalties for failure to file Form 8824 but there are consequences. For starters, you cant defer capital gains tax. This means that the exchange may be treated as a sale transaction subject to capital gains tax.
If a partnership holds IRC 751(a) property at the time of the sale, the partner recognizes gain or loss from its share of IRC 751(a) assets. The ordinary gain or loss is subtracted from the total gain or loss. The result is the partners capital gain or loss from the sale.
Partnerships file Form 8308 to report the sale or exchange by a partner of all or part of a partnership interest where any money or other property received in exchange for the interest is attributable to unrealized receivables or inventory items (that is, where there has been a section 751(a) exchange).
Form 8308, and New Penalty Relief, May Apply. Beginning with tax year 2023, partnerships that sell or exchange partnership interests must report additional information to the IRS, both on Form 8308 Report of a Sale or Exchange of Certain Partnership Interests and on their Schedule K-1 disclosures.

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Generally, if you make a like-kind exchange, you are not required to recognize a gain or loss under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, you must recognize a gain to the extent of the other property and money received.
If a partner or group of partners disposes of their partnership interests they can not defer their income tax liabilities by completing a 1031 Exchange because interests in a partnership are personal property interests and can not be exchanged for an interest in real property.
How do you report Section 1031 Like-Kind Exchanges to the IRS? You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.

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