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Tax Reporting for 1031 Exchanges

women doing taxes with calculator

 

In this blog, Tax Reporting for 1031 Exchanges, we will summarize required like-kind exchange tax forms and comment further about how the filing date of your taxes may impact your like king exchange time-period.

The IRS requires that you complete and file IRS Form 8824 which describes your 1031 Exchange transaction along with your tax return for the same year in which the exchange was completed. You will include a description of your relinquished and replacement properties along with dates of when you sold, identified, and acquired your properties. Any taxable gains on the sale of your relinquished property will need to be reported on IRS Form 4797. Keep in mind that only like-kind properties qualify and that you cannot do a like-kind exchange of a personal residence or for stock or equities and these types of assets are classified as disqualified personal property.

 

We have previously discussed that you must acquire your identified replacement property within 180-days after closing the sale of your relinquished property. Since you are required to report the acquisition date of your replacement property on IRS Form 8824 which is due when your tax return is completed, you may encounter a situation where you may have less than 180 days to conclude your 1031 Exchange transaction. Let’s suppose that you sold your relinquished property after October 17th and on or before December 31st of a given tax year. If you file your tax returns for that year by the normal tax deadline i.e., on or before April 15th of the following year, you will have less than 180 days to conclude your 1031 Exchange (!). To avoid reducing the amount of time to complete the exchange, you should plan to file state and federal tax filing extensions which would then give you the full 180 days allowed under the tax code.

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Hot link the forms cited about to these pdfs:

IRS Form 8824: chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/https://www.irs.gov/pub/irs-access/f8824_accessible.pdf

IRS Form 4797: chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/https://www.irs.gov/pub/irs-pdf/f4797.pdf

 


BIO : Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $2 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student and senior housing.Paul Getty’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, work-outs, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions.Paul Getty also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals.

Prior to founding First Guardian Group/FGG1031,Paul Getty was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 25 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M.

Paul Getty holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. He is a member of Institute of Real Estate Management (IREM), a Certified Property Manager Candidate (CPM), and a member of the US Green Building Council.Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered representative with LightPath Capital Inc, member FINRA /SIPC .

Paul Getty is a noted speaker, author, and actively lectures on investments and sales and management related topics. He is author of The 12 Magic Slides ,Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors , and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.



Disclaimer
There is no guarantee that any strategy will be successful or achieve investment objectives. All real estate investments have the potential to lose value during the life of the investments. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains information that has been obtained from sources believed to be reliable. However, FGG1031, First Guardian Group, LightPath Capital, Inc., and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies, declining market values, potential loss of entire investment principal.

Past performance is not a guarantee of future results: potential cash flow, potential returns, and potential appreciation are not guaranteed in any way and adverse tax consequences can take effect.  The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All financed real estate investments have a potential for foreclosure. Delaware Statutory Trust (DST) investments are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions. Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of LightPath Capital, Inc. Member FINRA / SIPC. FGG1031, First Guardian Group, and LightPath Capital, Inc. are separate entities.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over one million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than five million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.