Basis of property received in a like-kind exchange

The starting rule: carryover basis

A like-kind exchange is a nontaxable exchange, one in which you are not taxed on any gain and cannot deduct any loss. Publication 551 explains that when you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. For real property under section 1031, the exchange only qualifies if you hold both the property you give up and the property you receive for business or investment purposes. The gain is not erased, only deferred: it stays inside the lower basis of the new property and shows up when you eventually sell.

The publication's first example is the clean case. You exchange investment real estate with an adjusted basis of $50,000 and a fair market value of $80,000 for other investment real estate worth $80,000. No gain is recognized, so your basis in the new property is the same $50,000. Its value is $30,000 higher than its basis, and that $30,000 is the deferred gain.

Paying cash adds to basis

If you trade property and also pay money, the basis of the property you receive is the basis of what you gave up plus the money you paid. Publication 551 gives a parcel with an adjusted basis of $30,000 exchanged for a parcel worth $75,000 with $40,000 paid. The new basis is $70,000. Only the cash you paid is added; the unrealized appreciation on the old parcel is still deferred.

When you receive cash or other property

An exchange is partially nontaxable when you receive non-like-kind property or money in addition to the like-kind property. Publication 551 starts from the adjusted basis of the like-kind property you gave up and then adjusts. You decrease it by money received, by liabilities the other party assumes (or pays off in a deferred exchange) on the property you gave up, and by any loss you recognize on non-like-kind property you gave up. You increase it by additional costs, by liabilities you assume or new debt on the property you receive, and by any gain you recognize.

The publication's example: you trade a parcel worth $62,000 with an adjusted basis of $60,000 for a parcel worth $52,000 plus $10,000 cash. You realize $2,000 of gain ($52,000 plus $10,000 minus $60,000). Because the cash received is larger than the gain, all $2,000 is recognized. Basis is $60,000 minus $10,000 cash received, plus $2,000 gain recognized: $52,000. The calculator above gives this result when you enter 60,000 as the adjusted basis, 52,000 as the value of the like-kind property received and 10,000 as cash received.

Splitting basis when you receive a truck and a parcel

The next publication example adds a non-like-kind asset. You exchange investment real estate with a $15,000 adjusted basis for real estate worth $16,000, a truck worth $3,000 and $1,000 cash. Realized gain is $5,000. Cash plus the truck is $4,000, which is less than $5,000, so gain is recognized to the full $4,000. Total basis is $15,000 minus $1,000 cash plus $4,000 gain, or $18,000. Publication 551 then says to allocate basis first to the non-like-kind property other than money, up to its fair market value: $3,000 to the truck, leaving $15,000 for the real estate.

When the real estate itself has several parts, such as land and a depreciable building, the publication splits the real estate basis into carryover basis (the adjusted basis you gave up) and excess basis (the rest), and allocates each in proportion to fair market value. In its example, $10,000 of carryover basis and $4,000 of excess basis are spread 10 percent to land and 90 percent to the building, which produces $1,000 and $400 for the land and $9,000 and $3,600 for the building. The reason to care is depreciation, which the publication refers to Pub. 946.

Giving up non-like-kind property too

If you give up non-like-kind property in the same deal, you must recognize gain or loss on it. In the publication's example you give up stock (fair market value $1,000, adjusted basis $4,000) and real estate (adjusted basis $15,000) for real estate worth $20,000. You recognize the $3,000 loss on the stock. Basis of the property received is $15,000 plus $4,000, minus the $3,000 loss: $16,000. The optional fields at the bottom of the calculator handle this case.

Expenses, related parties and sale-and-purchase traps

Exchange expenses, which include closing costs paid on the property given up, are added to the basis of the property received. Other items on a closing statement, such as property tax prorations, rent prorations, security deposits and repairs, are not exchange expenses and do not add to basis. If related persons exchange property and either one disposes of it within two years, the exchange stops qualifying, each person reports the deferred gain in the year of the later disposition, and the basis becomes the fair market value at the time of the exchange plus the exchange expenses. Exceptions include a disposition because of death and involuntary conversions. Separately, if you sell and rebuy in two mutually dependent transactions, the publication says you may be treated as having made one exchange, so you cannot manufacture a higher depreciation basis. Its example keeps basis at $650,000 rather than $900,000.

What the calculator does not decide

The calculator follows the arithmetic in Publication 551. It does not decide whether your property qualifies as like-kind, whether your boot is netted against liabilities in the way a qualified intermediary documented, or how the Form 8824 lines are completed. Those questions turn on the facts of your exchange. For the 45-day and 180-day deadlines, use the exchange deadline calculator linked below.

Sources

• IRS Publication 551, Basis of Assets (12/2025): Basis Other Than Cost, Nontaxable Exchanges, Like-Kind Exchanges of Real Property (Exchange expenses, Property plus cash, Special rules for related persons), Partially Nontaxable Exchange (Allocation of basis), Non-Like-Kind Property Given Up, Sale and Purchase. Read November 2, 2026.

Edition read: Publication 551 (12/2025). Dollar figures in the examples are the publication's own. This page summarizes the publication and does not replace it.