Marie Flavin of IPX, a Qualified Intermediary I have used, sent me the below email regarding certain tax rules and deadlines affecting investors who are deferring their gain through a 1031 tax deferred exchange.
As stated in the below email I received from Marie, the deadline for completing the exchange is the earlier of 180 days from the sale of the old property or the due date of the taxpayer’s tax return for the year in which the old property was disposed. in order to get the full 180 days, the tax payer will need to file an extension.
Many 1031 Exchanges Will Expire on April 15th!
You Or Your Clients May Have Less Than 180 Days to Complete An Exchange
When a taxpayer sells an investment property and implements a 1031 tax deferred exchange, there are a few time period requirements the taxpayer must follow. 1031 taxpayers have 45 days from the sale of the relinquished (old) property to identify new property to purchase. The deadline for completing the exchange is the earlier of 180 days from the sale of the old property or the due date of the taxpayer’s tax return for the year in which the old property was disposed. If a taxpayer sold property after October 18, 2009 and utilized a 1031 exchange, the taxpayer’s exchange period will expire on April 15, 2010 (assuming the taxpayer is a calendar year paying taxpayer). In order to ensure the taxpayer has a full 180 days to purchase new property, the taxpayer must file for an extension. For example, if the relinquished (old) property closed on December 2, 2009, unless the taxpayer files for an extension, the taxpayer will only have until April 15th to acquire their replacement (new) property. However, if the taxpayer files for an extension of their tax return the taxpayer will have the entire 180 days (May 31, 2010) to complete the exchange.
Tax Forms You May Need
It is important to note that, taxpayers must report their exchange on the tax return for the year in which the exchange begins.
Form 8824 is used to report the 1031 exchange. This form requests the date of the exchange transaction, the date properties were “identified” and financial information obtained from the closing/settlement statement.
Form 4797 is used when depreciable rental or business property is sold.
Form 1041 is used when non-depreciable investment property is sold.
Form 4868 is used to file for an extension.
Marie C. Flavin, Esq. Vice President, Northeast Regional Manager 80 Business Park Drive, Suite 205 ● Armonk, NY 10504 (877) 230-1031 Toll Free
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I have attended seminars with Marie and I can tell you she is very knowledgeable and has been very helpful in the past with some very intricate transactions.
Circular 230 Disclosure Notice: To ensure compliance with Treasury Department rules governing tax practice, I am informing you that any information contained in any post on this blog or in any attachment (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.