I have received numerous calls over the years, and a signficant number of calls after last year's failures of two 1031 exchange Accommodators, asking about the taxation of a failed 1031 exchange once or if the taxpayer's Accommodator fails and files for bankruptcy protection.
It is a very sad and unfortunate event when a taxpayer's 1031 exchange Accommodator fails, and is even more frustrating when it is because of a theft of 1031 exchange funds.
Chief Counsel Issues Letter
We now have some guidance, although it is not binding and is not an IRS Ruling of any sort, but it is guidance non-the-less.
The IRS's Office of Chief Counsel issued an informational letter (INFO Letter No. 2008-0021) regarding the income tax consequences of a failed 1031 exchange transaction due to the failure of the Qualified Intermediary (also referred to as a QI).
The IRS was responding to a inquiry made by Congressman Delahunt of Massachusetts on behalf of his constituents that had lost money through a failed 1031 exchange transaction because their 1031 exchange Qualified Intermediary had failed and filed for bankruptcy law protection.
Thursday, July 17, 2008
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2 comments:
Do you have a list of QIs that have failed in the last 5 yrs, or 3 years?
Where can I read IRS letter 21?
No, we do not keep a list of failed Qualified Intermediaries. You can click on the link in the post to access and read the Letter referred to.
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