Reporting a 1031 Exchange

Reporting a 1031 Exchange

We receive numerous questions about how you should report your 1031 Exchange on your tax return. As a Qualified Intermediary we cannot provide specific tax advice, here are some basics that you can review with your tax professional.

When you complete a 1031 Exchange, you report the information for the exchange on Form 8824. If you had an exchange that began in 2020 and was completed in 2021, the transaction would be reported on your 2020 tax return. If there were unused exchange funds that were released to you at the end of the exchange period, the receipt of those funds would be reported on IRS Form 6252.

In another scenario, your Relinquished property closes in 2020 but you are unable to identify Replacement property within your Identification Period, which falls in 2021. When a failed exchange like this spans two tax years, it may be treated as an installment sale under IRC §453. You should consult with your tax professional as you may be able to recognize the gain in 2020 or 2021, whichever is more beneficial in your situation.

You should always consult with your tax professional in situations as described above to determine what is best in your specific conditions.