1031 tricks for fall exchangers - by Patricia Flowers

Patricia Flowers, Investment Property Exchange Services

What is a Qualified Intermediary’s favorite holiday? “10-31” (Halloween) of course! And happy to say any day can be a “10-31” day for taxpayers selling investment property.

The first nine months of this year have been extremely busy for IPX1031, with no let-up for “summer slide.” So it’s hard to imagine we are already in the midst of Fall, quickly on our way to year-end. Taxpayers planning to open a Section 1031 Exchange account now, anticipating a 4^th quarter sale closing, question their ability to close on a replacement by year end. No need to fear – the IRS allows taxpayers the full 180 day exchange period to purchase the previously identified replacement property, even if that date falls in the next tax year.

To properly report a successful exchange, taxpayers must declare it on their return for the year in which the exchange begins, answering questions on both the relinquished and replacement transactions.

With 2016 being a leap year, any exchanger relinquishing property after October 18 has less than 180 days in which to complete the exchange (assuming calendar year filers with a tax due date of April 15). For those who sold after that date and cannot complete the replacement purchase in the shortened timeframe, the “trick” is to file a tax return extension (IRS Form 4868), making full use of the 180 days. Upon conclusion of the exchange, IRS Form 8824, like-kind exchanges, must be prepared to reflect the completed transactions. Among other things, this form requests property information, transaction and identification dates, gain/loss and other financial data.

As always, contact IPX1031 or your tax advisor for more information as timing is crucial for Tax Deferred Exchanges and tax reporting.

Patricia Flowers is vice president for Investment Property Exchange Services, Inc. (IPX1031), Boston.