The short answer
Only when line 7 is Yes. Line 7 asks whether the exchange of the property given up or received was made with a related party, either directly or indirectly, such as through an intermediary; if Yes, you complete Part II, lines 8 through 11, and file Form 8824 again with each of the next two returns. Related means the family and entity relationships in section 1031(f)(3), which the instructions summarize as your spouse, child, grandchild, parent, grandparent, brother, sister, or a related corporation, partnership, trust or estate. If a related party sold you the replacement for cash and no exception applies, you do not file Form 8824 at all; you report a sale.
At a glance
| Trigger | A Yes on line 7: a related party on either side, directly or indirectly |
|---|---|
| Indirect | Through a qualified intermediary or accommodation titleholder, or a disregarded entity owned by you or the relative |
| Part II lines | 8: who; 9: did they dispose; 10: did you dispose; 11: exceptions |
| Later filings | Parts I and II for each of the two years after the exchange year |
| Holding period | Two years from the last transfer, suspended while risk of loss is substantially reduced |
| Exceptions | Death of either party, a later involuntary conversion, or no tax-avoidance purpose |
| Related seller paid in cash | Do not file Form 8824 unless an exception applies; report a sale |
Line 7 decides it, and it looks at both properties
The question on Form 8824 line 7 covers the property given up and the property received. So Part II applies if you sold to a relative or a related entity, bought from one, or swapped deeds with one, whether or not your intermediary stood in the middle.
The instructions add two indirect routes: an exchange 'through an intermediary (such as a QI or an EAT)', and an exchange made by a disregarded entity, such as a single-member LLC, 'if you or a related party owned that entity.' The family list stops at spouse, siblings, ancestors and descendants; in-laws, nephews and cousins are outside it unless an entity brings them in. The full test is in who counts as a related party.
Line 7 is No when no related person is on either side. Co-buying a replacement with your adult children from an unrelated seller is one example, explained in exchanging into a TIC with your children.
Part II asks four things, and line 11 is where an exception is claimed
Line 8 is the related party's name, relationship to you, identifying number and address. Line 9 asks whether, during this tax year and within two years of the last transfer, the related party sold or disposed of any part of what they received from you or your intermediary; line 10 asks the same of you for what you received.
If both are No in the exchange year, you go on to Part III and report the exchange normally. If either is Yes, you complete Part III and report the deferred gain or loss from line 24 on this year's return unless a line 11 exception applies.
Line 11 lists the three statutory exceptions from section 1031(f)(2): 11a, a disposition after the death of either related party; 11b, an involuntary conversion where the threat arose after the exchange; and 11c, where you can show that neither the exchange nor the disposition had tax avoidance as one of its principal purposes. Box 11c requires an attached explanation.
The form comes back for two more years, and it is short when nothing happened
The instructions require Form 8824 'for the 2 years following the year of a related party exchange.' In those years you complete Parts I and II only, and if lines 9 and 10 are both No you stop there.
The two-year period runs from the last transfer in the exchange, as Publication 544 also explains. Under section 1031(g), it does not run while either holder's risk of loss is substantially diminished by a put, another person's right to acquire the property, or a short sale or other transaction. What happens to the gain when a disposition does occur is set out in the two-year rule for related-party exchanges.
If you sold to a relative for cash, line 9 still asks whether they disposed of property received 'from you (or an intermediary)', which is why advisers ask related buyers to hold; see selling property to a family member.
Worked example: a March 2026 swap with your brother
Hypothetical; check your own dates with your CPA. You exchange your warehouse for your brother's retail building in a direct swap that closes March 16, 2026. Neither of you takes cash, so both exchanges are fully deferred, and the two-year period ends March 16, 2028.
Your 2026 return: line 7 Yes, Part II with your brother's details, lines 9 and 10 No, then Part III as usual. Your 2027 return: Parts I and II only. Your 2028 return: Parts I and II again, because the period runs into March 2028.
Now suppose your brother sells the warehouse in August 2027. Your 2027 Form 8824 shows line 9 Yes. Unless an exception on line 11 applies, you complete Part III and report your deferred gain from line 24 on your 2027 return, and your brother does the same with his.
- 2026: Parts I, II and III.
- 2027: Parts I and II; Part III too if line 9 or line 10 is Yes.
- 2028: Parts I and II for a period that ends inside that year.
When a relative sold you the replacement, the form may not be the right form
The note under line 7 says not to file Form 8824 if a related party sold property into the exchange, directly or through an intermediary, that property became your replacement, and none of the line 11 exceptions applies. You report the relinquished property as a sale instead. That follows Rev. Rul. 2002-83, which denies nonrecognition when a related party receives cash for replacement property routed through an intermediary.
The instructions say tax avoidance generally will not be a principal purpose where the related party's disposition is itself a nonrecognition transaction, which is the usual route when a relative also exchanges. The planning is in buying replacement property from a relative.
Replacements bought from unrelated sellers, including interests in a Delaware statutory trust offered by an unrelated sponsor, keep line 7 at No.
Related questions
My intermediary is unrelated. Can line 7 still be Yes?
Yes. The instructions treat an exchange through a qualified intermediary or accommodation titleholder as an indirect exchange with the related party who bought or sold on the other side.
Is my son-in-law a related party for line 7?
Not as family. The list is spouse, siblings, ancestors and lineal descendants, so in-laws are outside it unless an entity relationship brings them in.
What happens if I leave Part II blank when it applied?
The return is incomplete, and the record that the two-year rule was satisfied is missing. Amending to add it is the cleaner fix; see I forgot to file Form 8824.
Do I need the related party's Social Security number?
Line 8 asks for the related party's identifying number, which for an individual is their taxpayer identification number.
Does the death of my relative end the filings?
A disposition after the death of either party is excepted on line 11a. The instructions still describe filing for the two following years, so check with your preparer whether a final Part II is expected.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.