Reporting a 1031 Exchange to the IRS

It is well past the deadline to file your personal income tax return for the 2007 income tax year. You should have filed it by April 15, 2008 unless you filed for an extension of time to file. If not, you still have time to do so. Here is the down and dirty.

Receiving Lots of Tax Related Questions Regarding 1031 Exchanges

However, I have been receiving a lot of calls over the last few weeks from real estate investors as well as accountants, CPAs, enrolled agents and tax attorneys asking when and how to report their client's 1031 exchange for income tax purposes.

We have a lot of real estate investors that are operating under an extension of time to file their Federal income tax returns and who are just now getting around to the fun process of completing and filing their Federal income tax returns and reporting their 1031 exchange transaction for last year.

Reporting Your 1031 Exchange to the IRS

Your should report your 1031 exchange transaction in the year in which the disposition or sale of your relinquished property closed. For example, if you closed on the sale of your relinquished property in FYE 2008 and subsequently bought your like kind replacement property in FYE 2009 your 1031 exchange should be reported on your FYE 2008 Federal income tax return even thought your 1031 exchange was not completed until 2009.

It is also very, very importnat that you file an extension of time with the IRS to file and complete your Federal income tax return, then you must complete your 1031 exchange transaction, and finally you must file your Federal income tax return with the IRS and report your 1031 exchange transaction on IRS Form 8824 if your 1031 exchange transaction straddles two (2) income tax years.

You can review more about the 1031 exchange deadlines.

You can read a lot more about reporting your 1031 exchange for IRS purposes on our website at http://www.exeter1031.com/reporting_1031_exchange_for_income_taxes.aspx including links to the various forms that will be needed.

You are always welcome to contact us with questions as well.