The short answer
Mostly, it is not. The partnership reports the exchange on its own Form 8824 filed with Form 1065, and the deferred gain stays inside the partnership as a lower basis in the replacement property. Your Schedule K-1 shows only what the exchange recognized: your share of any boot gain, typically as net section 1231 gain with an unrecaptured section 1250 amount, plus any change in your share of partnership debt. You do not file Form 8824 yourself unless you exchanged property in your own name.
At a glance
| Who files Form 8824 | The partnership, with its Form 1065 for the year of transfer |
|---|---|
| Deferred gain on the K-1 | None; it stays in the partnership's basis in the replacement |
| Recognized boot | Net section 1231 gain in box 10, with unrecaptured section 1250 gain in box 9c |
| Rental recapture | Ordinary gain on rental assets is reported with the rental activity |
| Debt changes | Item K shows your share of liabilities; a decrease is treated as a cash distribution |
| Capital account | Item L uses the tax-basis method, so deferred gain does not change it |
| Return flags | Schedule B Questions 11 and 12 ask about distributed replacement property |
Form 8824 is the partnership's form, not yours
The Form 8824 instructions say that if 'you transferred property to another party in a like-kind exchange, you must file Form 8824 with your tax return for that year'. When the partnership held title, the partnership transferred the property, so the form goes with the partnership's Form 1065.
The partnership's preparer computes realized gain, boot and the replacement basis on lines 15 through 25. The deferred gain on line 24 is not a partnership income item, so it is never allocated to you; it lives on as the gap between the replacement's value and its basis under section 1031(d).
If you made a separate exchange of property you own personally, including a deeded interest after a drop and swap, that is your own Form 8824. The line-by-line walk-through is in how to fill out Form 8824.
Only the recognized part of the exchange flows to your K-1
Recognized gain goes from Form 8824 to Form 4797 at the partnership level. Per the Form 1065 instructions, net section 1231 gain flows to box 10 of Schedule K-1, and the unrecaptured section 1250 portion, which is taxed at up to 25%, is reported in box 9c.
Ordinary gain from 'rental activity assets' is not put on the ordinary business income line; the instructions route it through Form 8825 and report it as part of the rental activity. For a trade or business, ordinary gain goes on Form 1065, line 6.
Those amounts are your distributive share under the partnership agreement, which may not match who received any cash; that issue is covered in who is taxed when a partnership distributes cash to one partner.
Your share of debt is the line partners most often miss
Item K of the K-1 shows your share of partnership liabilities at the start and end of the year. If the replacement carries less debt, your share falls, and under section 752(b) 'any decrease in a partner's share of the liabilities' is treated as a distribution of money to you.
A deemed distribution reduces your basis and becomes gain only if it exceeds your basis, under section 731(a). Partners with low or negative tax capital are the ones exposed.
Item L reports your capital account on the tax-basis method. The partner's instructions note it 'may not equal the adjusted tax basis in your partnership interest', mainly because it excludes your share of liabilities.
Worked example: a 50/50 partnership trades down its debt by $100,000
Hypothetical, round numbers; run your own numbers with your CPA. The partnership sells a building for $2,000,000 with a basis of $800,000 and repays a $600,000 loan. It buys a $1,900,000 replacement with all $1,400,000 of cash and a new $500,000 loan.
Net liabilities relieved are $100,000, which Form 8824 line 15 counts as boot, so $100,000 of the $1,200,000 realized gain is recognized and $1,100,000 is deferred. The replacement's basis is $800,000, its $1,900,000 cost less the deferred gain.
Each partner's K-1 shows $50,000 of gain, much of it likely in box 9c as unrecaptured section 1250 gain. Item K drops by $50,000 each, a deemed distribution that the $50,000 of allocated gain offsets in basis. Item L rises by the $50,000 of gain. The deferred $550,000 each does not appear anywhere on the K-1.
Two questions on the partnership return track what happens next
Schedule B Question 11 asks whether the partnership did a like-kind exchange in the current or preceding year and distributed the replacement property this year. Question 12 asks whether it distributed property to partners to be jointly owned, the footprint of a drop and swap.
If you receive property in a distribution, the partnership reports its basis in box 19, code C, and you file Form 7217 with your return. For trust interests held by the partnership, the year-one tax package works differently; see DST tax forms and reporting.
Keep each K-1 from the exchange year with the partnership's Form 8824 copy. You will need both when the replacement is sold or when you leave the partnership; see basis in replacement property after a 1031.
Related questions
Should my K-1 show the deferred gain anywhere?
No. Deferred gain is not an item of income, so there is no K-1 box for it. It is tracked through the partnership's lower basis in the replacement property.
Do I attach Form 8824 to my Form 1040 because my LLC did an exchange?
No, unless you personally transferred property. The partnership attaches Form 8824 to its own Form 1065.
Why did my K-1 show gain when the partnership reinvested all the cash?
Usually because the replacement carried less debt. Net liability relief counts as boot on Form 8824, line 15, unless offset by new debt or added cash.
Does the exchange change my capital account?
Not the deferred part. Item L rises only by recognized gain allocated to you and falls by distributions, including cash paid out after the exchange.
Will the K-1 show depreciation on the replacement?
Yes, from the year the replacement is placed in service, as part of rental or business income. How the carried-over and excess basis are depreciated is in depreciating replacement property.
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.
- IRS, Instructions for Form 8824 (2025)
- 26 U.S.C. Section 1031, like-kind exchanges
- IRS, Instructions for Form 1065 (2025)
- IRS, Partner's Instructions for Schedule K-1 (Form 1065) (2025)
- 26 U.S.C. Section 752, partnership liabilities
- 26 U.S.C. Section 731, partnership distributions
- IRS, Instructions for Form 7217