The New Year and 1031 exchanges

If you are in the middle of an exchange, you might be wondering about your exchange that carries over into the new year.

If you are a taxpayer currently conducting a 1031 exchange and your 180 deadline is in 2008, you should NOT file your income tax return prior to completing your exchange. If you proceed with filing your return, you will not be in compliance with section 1031 regulations. Also, if your deadline for completing the exchange is after the April 15th filing date (for personal tax returns) - you will need to file for an extension to complete your exchange.

Otherwise, when you file your return, your replacement period ends - even if your 180-day period is still open. If you have not completed the acquisition, you've invalidated your exchange and guess what? Yep. You now get to pay tax on the sale of that old property.

If you are using a professional Qualified Intermediary, they should be sending you a letter or contacting you by phone to remind you and/or your accountant - just in case you forget this rule. If you are using someone that doesn't, tie a string around that finger, write a note on your refrigerator and call your accountant and make sure they know not to file that return before you've completed your exchange. Oh, and get a QI that does.

"May all your troubles last as long as your New Year's resolutions"
Joey Adams