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Like-kind exchange disposal method

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This topic describes the fields that appear in the Disposal tab or Enter Disposal Information window when you choose Like-Kind Exchange as the method of disposal and enter the date on which the asset was disposed.

Special information

Use Sold/scrapped as the disposal method to dispose of a Section 1245 asset as a like-kind exchange for book or state purposes for tax years beginning 2018 and later.

You cannot mass dispose of section 1245 assets using Sold/Scrapped for federal purposes and Like-Kind Exchange for book or state treatment purposes.

To apply separate passenger auto limits when electing out of Reg. 1.168(i)-6, mark the Apply separate passenger auto limits when electing out of Reg. 1.168(i)-6
checkbox in the Setup, then Options, then Calculation tab before entering the trade. Note that this setting applies only to trades that are entered after the checkbox is marked.

The application does not automatically handle exchanges involving non-qualifying property; it assumes that all losses are unrecognized.

Like-kind exchange disposal information transfers to the appropriate form in UltraTax CS, if licensed ; however, you may need to enter additional information on Form 8824.

The book gain/loss from a like-kind exchange does not transfer to UltraTax CS .

You cannot dispose of Section 1245 property as a like-kind exchange after 12/31/17.

Fields & buttons

FMV of other property given up

If other property in addition to the like-kind property was given up, enter the fair market value of the other property.

Adj basis of other property given up

If other property in addition to the like-kind property was given up, enter the adjusted basis of the other property.

Cash received

Enter the amount of cash paid by the other party.

FMV of other (not like-kind) property received

If property was given up in addition to the like-kind property, enter the fair market value of the property in this field.

Installment obligation received

Enter the amount of installment obligation received if at least one payment on the note is to be received after the close of the tax year in which the disposition occurred.

Liabilities (including mortgages) given up

Enter any liabilities, including mortgages, that the other party assumes as part of the exchange.

Liabilities assumed

Enter the liability assumed for the like-kind exchange.

Cash paid

Enter the amount of cash paid to the other party in the exchange.

Exchange expenses incurred

Enter any costs of exchanging the property with the new owner.

FMV of non sec 1245 like-kind property received

Enter the fair market value of any non section 1245 like-kind property received. This includes any non section 1245 property entered in the FMV of like-kind property received. This field should be used only for like-kind exchanges with 1245 property.

FMV of like-kind property received

Enter the FMV (fair market value) of the like-kind property received from the other party in the exchange.

Total amount realized

The application calculates the total amount realized in the exchange and displays it in this field.

To view an on-screen explanation of how the application calculated the total amount realized, select the underlined field label to open the Total Amount Realized window. Select the Print button to print the calculation explanation.

Adjusted basis of original asset

This is the original basis of the asset calculated with depreciation allowed or allowable.

Depreciation allowed is the total depreciation of the asset.

Depreciation allowable is either the depreciation allowed if the asset was 100 percent business use, or the prior depreciation calculated by Fixed Assets CS plus the current depreciation. (To view the calculated amount of prior depreciation for the current asset, select Tasks, then Prior Depreciation Comparison.)

For a partial disposition, enter the adjusted basis calculated with depreciation allowed or allowable for the whole asset before it was divided.

note

This field is available only for the casualty / theft - replacement, casualty / theft - no replacement, and like-kind exchange methods of disposal.

You can override the calculated amount by entering a different amount in this field. To remove the override amount and re-enter the application-calculated amount, select Edit, then Delete Override.

Section 121 exclusion

If the property given up was a home, enter any section 121 exclusion amount in this field.

note

This field is available only for 1040 clients.

Total amount given up

The application calculates the total amount given up in the exchange and displays it in this field.

To view an on-screen explanation of how the application calculated the total amount given up, select the underlined field label to open the Total Amount Given Up window. Select the Print button to print the calculation explanation.

Gain realized

This field displays the recognized gain for the Tax treatment.

To view an on-screen explanation of how the application calculated the gain realized, select the underlined field label to open the Realized Gain window. Select the Print button to print the calculation explanation.

Gain recognized/(loss) realized

This field displays the recognized gain or realized loss for the Tax treatment.

To view an on-screen explanation of how the application calculated the gain recognized / loss realized, select the underlined field label to open the Realized Gain or Realized Loss window. Select the Print button to print the calculation explanation.

Type of Property

From the dropdown list, select the type of property being disposed of to determine which part of Form 4797 applies.

Information does not print on Form 4797 for assets disposed of through a like-kind exchange.

Apply 28% rate

Mark this checkbox to force the 28 percent rate for the gain or loss for this asset. The amount will appear on Form 4797, Part 1.

Income Classification button

Select this button to open a window in which you can enter income classification data when recording an asset disposal for a 990 client.

Real Property button

Select this button to open a window in which you can specify section 1250 information.

note

This button is available only for assets with a 25-year or greater MACRS life when casualty / theft - replacement, casualty / theft - no replacement, or like-kind exchange method of disposal is selected.

Book Calc button

Select this button to open a window in which you can view and adjust the asset's Book calculation.

note

This button is available only if

Casualty / Theft - Replacement, Casualty / Theft - No Replacement, or Like-Kind Exchange is selected in the Method
field, and

the Follow GAAP calculations for disposals
checkbox is marked in the Setup, then Treatments, then Options window for the Book treatment.

Related Party Exchange button

Select this button to open a window in which you can enter related party exchange information, if appropriate.

Replacement asset group box

Date identified

Enter the date in MMDDYY
format.

Date received

Enter the date in MMDDYY
format.

Asset number

When an asset is disposed of through a like-kind exchange or through casualty / theft with a replacement asset, the application automatically creates the new asset and enters the next available asset number in this field.

note