It's Almost 10-31 Day! Read Important Information for Investors Beginning an Exchange

Important Information for Investors Beginning an Exchange

From October 17 – December 31, 2022

Do Not File Your 2022 Income Tax Return Until Your Exchange Has Been Fully Completed.

The time frame you have to complete the acquisition of your replacement property ends at midnight on the earlier of the 180th day after the date you transferred the relinquished property OR the due date (including extensions) for your income tax return for the taxable year in which the transfer of the relinquished property occurs. (U.S. Treasury Regulations section 1.1031(k)-1(b)(2)).

This means if the 180th day following the closing of your first relinquished property falls after the due date for your 2022 tax return (this year, for individuals, April 17, 2023), you must file an application for extension of time with the IRS to extend the due date. If you do not file for an extension, you will NOT be able to acquire any replacement property in your exchange after your tax return due date.

REMEMBER:

If your exchange is not completed by the due date of your tax return —

FILE AN EXTENSION.

Check Out Our Video Library - ADVANTAGE TV

What are the top questions we receive from clients? Tune in as Tina Colson & David Moore of Equity Advantage walk through the common misbeliefs surrounding section 1031... including carrying over equity in an exchange, disqualified parties, and blending properties!

The 1031 Exchange doesn't have to be scary...

Can I recoup my initial down payment on the property I am selling?

No, the IRS takes the position that the first money out is theirs. In other words, you cannot be reimbursed your initial investment without incurring tax exposure. It is possible to receive money; however, any funds received will be taxed.

If the investor does not move forward with an exchange, then the transfer of property is a sale subject to taxation.?

An investor that holds property longer than 1 year will be taxed at the favorable capital gains tax rate. Otherwise, the sales gain is taxed at the ordinary income rate.

Check out our capital gains calculator to illustrate potential taxes if you sell your property rather than exchange.