Tax Season Tips for 1031 Exchanges

Tax season is in full swing, and many investors, taxpayers, and CPAs are working hard to file their taxes on time. Investors who engage in 1031 exchanges often have questions about how to report them on their tax returns. In this article, we are going to offer a few tips for 1031 exchanges this tax season.

Talk to Your CPA

The most important tips we can give you is to talk to your CPA about your 1031 exchange as it relates to your tax situation. It’s best to inform your CPA of any like-kind exchanges early in the process, but at the very least, be sure to inform them of the exchange prior to filing your tax return.

File Form 8824

IRS form 8824 is the standard method used to report your 1031 exchange to the IRS in your tax return. This form tells the IRS that you have completed, or are in the process of completing a 1031 exchange. It also provides the details of the exchange so they understand where the net proceeds are and where they are going to be reinvested.

Like-Kind Exchanges of Real Estate

Like-kind real estate exchanges offer a seamless way for you to defer your capital gains taxes on the sale of real estate, and keep your money working for you in a continued real estate investment property. While that may sound easy, 1031 exchanges are often complex and require a skilled qualified intermediary to successfully navigate. Contact CPEC1031 today to set up a time to chat with one of our skilled Minnesota qualified intermediaries. Our main office is located in downtown Minneapolis, but we work with clients throughout the United States.

• Start Your Exchange: If you have questions about 1031 exchanges this tax season, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Tax Reporting Requirements When an S-Corp Does a 1031 Exchange

Tax day is almost here, and we're getting a lot of questions from clients about how to report property exchanges to the IRS. This article focuses on the topic of S-Corp property exchanges and IRS reporting requirements.

When an S-Corp Exchanges Property

When an S-Corp exchanges a property do the shareholders report the exchange via Form 8824 on their own 1040? If so, should each shareholder receive the relevant transaction info (acquisition/disposition dates, share of gross sales price etc., etc.) with their Schedule K-1?

Answers from the IRS

To answer questions like these, it's always best practice to go right to the IRS for answers. This link to the IRS website offers some insight to the question. Here are some relevant excerpts so you don't have to read through the entire article:

"Partners and S corporation shareholders. If you received a Schedule K-1 from a partnership or S corporation reporting the sale, exchange, or other disposition of property for which a section 179 expense deduction was previously claimed and passed through to its partners or shareholders, you must report your share of the transaction on Form 4797, 4684, 6252, or 8824 (whether or not you were a partner or shareholder at the time the section 179 deduction was claimed)."

"If the disposition was a disposition of property given up in an exchange involving like-kind property made during the partnership's or S corporation's tax year, any information you need to complete Form 8824."

"Partnerships (other than electing large partnerships) and S corporations do not report these transactions on Forms 4797, 4684, 6252, or 8824. Instead, they provide their partners and shareholders the information they need to report the transactions."

1031 exchanges can complicate your annual tax reporting, but it's important to be proactive and accurately report your exchange to ensure its success.

• Start Your Exchange: If you have questions about 1031 exchange tax reporting requirements, or anything regarding 1031, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved