TP couple has original main home and he bought another home bought with 2 close friends. 3 parties share paid the mortgage. In 2006, they sold that property and bought another one. The title company said, rental property exchange with another. They don't have to pay any tax. The title company issued form 1099-S with gross proceed of $270,000 to each of them. Where should I report this? cost 620,000 and sales 805,000. What form do I have to use to report that? Any suggestion???
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>>The title company said, rental property exchange with another. They don't have to pay any tax.<<
Well, was a Section 1031, Like-Kind Exchange actually done? Was their an intermediary involved in the transactions?
If no Section 1031 happened, then the profit is likely taxable on Sch D for all 3 parties (but if one or more party qualifies under Sec 121, i.e. lived & owned in it for 2 of the past 5 years).
Bill -
More detail
All parties don't live there. The property is single-unit family home and rented out to someone else. Refer to original post, I don't have the cost for the last property they got. I am still waiting for those data. I don't have any idea where to report, which form to use because of my client, one of three parties, already have principle home and he said the one that sold was like investment property. Do you all understand about the story? I really need help on this one. Please any advise in anyway. Thank you all for taking into consideration.
TComment
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So, the 3 parties bought into a property together. Since none of them lived there, then Sec 121 exclusion would be out.
Was a 3rd party intermediary involved in the exchange of the now-sold property and the new one? If so, you may have a qualified Section 1031 exchange (a.k.a. Like-Kind Exchange, or Starker Exchange). In that case, look at Form 8824. Note: there are rather specific requirements for a Sec 1031 exchange.
If no section 1031, then (presuming that it was a Sch E property -- you said it was "rented out to someone else") Form 4797 "Sale of Business Property" which flows to Sch D.
BillComment
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Escrow
I agree with Bill.
If this transaction was not on the personal residence, but an investment/rental property, then you need some more documentation.
First of all either the t/p or the escrow/title should be able to provide you with closing settlement statements, and the t/p or the t/p realtor should be able to provide you with the sale/purchase agreement of real estate that would indicate whether or not there is a 1031 like kind exchange transaction. Then there should be some documentation from a 3rd party exchange intermediary.
If there is a 1031 like kind exchange transaction, then you need another piece of the information, which would be the replacement property in the exchange, another escrow/title closing. Hopefully it was all transacted in 2006 and time limitations were met.
You can not rely on what escrow/title advises you, you definitely need more information.
SandyComment
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