Form 8824 is where every decision made during the exchange finally gets tested against IRS math. A clean closing file doesn't guarantee a clean 8824 if the underlying numbers, basis, boot, and dates, weren't tracked correctly along the way.
What Form 8824 Actually Calculates
Form 8824 requires a description of both the relinquished and replacement properties, the dates of transfer, the fair market values involved, and a calculation of realized gain, recognized gain, and the carryover basis in the replacement property. Realized gain is essentially the economic gain on the relinquished property. Recognized gain is the portion that's actually taxable, which is limited to any boot received. The carryover basis calculation determines the investor's basis in the new property going forward, which matters for depreciation and for any future sale.
What The CPA Needs Before Filing
Preparing an accurate Form 8824 depends on having specific figures ready well before the tax return is due, not assembled at the last minute.
- Original purchase price and adjusted basis of the relinquished property, including prior depreciation taken
- Sale price and closing costs from the relinquished property closing statement
- Purchase price and closing costs for the replacement property
- Any cash or mortgage boot received during the exchange
- The exact dates of both closings and the 45-day identification notice
Missing even one of these figures can force the CPA to estimate, which increases audit risk on a return that's already drawing IRS attention by nature of the exchange.
Why Prior Depreciation Matters More Than Investors Expect
Investors who've owned a Memphis property for years, whether an industrial building near the rail corridors or a small retail strip, often underestimate how much prior depreciation affects the 8824 calculation. Depreciation recapture is embedded in the basis carryover, and getting that number wrong doesn't just affect this year's return, it distorts the investor's basis in the replacement property for every year they hold it afterward, including whenever they eventually sell or exchange again.
Where 8824 Preparation Support Falls Short
Some exchange support packages promise tax reporting assistance without clarifying that Form 8824 itself is prepared by a CPA, not by the qualified intermediary or a general exchange coordinator. What documentation support can and should do is deliver the CPA a complete, reconciled set of figures, closing statements, basis history, and boot calculations, so the form gets filed correctly the first time instead of requiring an amended return later.
A Realistic Timeline For Getting The CPA What They Need
Most CPAs would rather receive exchange figures in stages than as one large packet in March. The relinquished property's basis and depreciation history can be pulled together as soon as that closing happens, well before the replacement property is even identified. Once the replacement closes, the purchase price, new debt amount, and any boot should be reconciled against that earlier basis work within a few weeks, not left until the return is actually due. An investor who spreads this work across the exchange, rather than compressing it into the weeks before filing, gives the CPA time to ask questions about an unclear figure instead of having to estimate it under deadline pressure. This staged approach also gives the CPA a chance to flag a depreciation gap or a missing closing statement while the relevant title company or lender is still easy to reach, rather than months after the file has gone cold. Investors who exchange properties repeatedly over several years should also keep each year's 8824 and its supporting figures on file permanently, since a future exchange's basis calculation traces back through every prior exchange in the chain, including transactions from years before the most recent one. A missing 8824 from an earlier exchange can force a CPA to reconstruct basis history from scratch, which is a slow and error-prone process compared to simply keeping the original filings on hand. Storing digital copies of every prior year's 8824 alongside the closing statements that support it, rather than relying on a CPA's old files or memory, protects the investor if that CPA relationship ever changes. This kind of simple recordkeeping costs almost nothing to maintain in the moment and saves real time and expense on every exchange that follows.
Common 1031 Exchange Questions
Who actually files Form 8824?
The investor's CPA prepares and files Form 8824 as part of the tax return. Exchange coordination and documentation support feed that CPA the figures needed, but the form itself is a tax preparation function.
What happens if Form 8824 is filed incorrectly?
An incorrect 8824 can trigger IRS scrutiny or require an amended return, and errors in basis carryover can compound into future years since the replacement property's basis depends on getting this calculation right the first time.
Does boot always show up on Form 8824?
Yes. Any cash or mortgage boot received during the exchange must be reported and is generally taxed as recognized gain in the year of the exchange.
How does prior depreciation affect the form?
Prior depreciation on the relinquished property reduces its adjusted basis, which flows directly into the realized gain and carryover basis calculations on Form 8824, so accurate depreciation records matter as much as the sale price itself.
When is Form 8824 due?
It's filed with the tax return covering the year the relinquished property closed, which is also why the 180-day exchange period is tied to the tax filing deadline for that year, including extensions.
