As April 15th looms ahead, those in a 1031 Exchange need to be mindful of the time lines, especialy if you are WITHIN the 180 days of closing on your property or if you’ve just started the Identification process!! Great “Year-End” tax strategies for those in a 1031 Exhange with a tax deadline looming from our show favorite Toni Esposti or Old Republic Exchange Services. Also, don’t forget our 5 part series on “YouTube” on Tax deferred Exchanges.
Toni Esposit as she appeared on the “Real Estate Hour”, Sundays, 9 to 10am, KSRO, 1350AM or www.KSRO.com
Tax Deadlines and Reporting an IRC §1031 Exchange
With tax deadlines occurring in March and April, it is important to remember that an IRC §1031 tax-deferred exchange must be reported on IRS Form 8824 for the year in which the property is transferred to another party in a like kind exchange. Applicable due dates for filing federal tax returns are as follows:
Individuals, single member LLCs and sole proprietorships – April 15th
Partnerships and multi-member LLCs – March 15th
Corporations – the 15th day of the third month after the end of the corporation’s chosen fiscal year
Form 8824 and instructions to complete Form 8824 can be found at the following IRS links:
Finally, although most taxpayers have 180 days to complete an exchange, some taxpayers will have less time if their tax filing deadline occurs prior to the expiration of 180 days1.
In order for those taxpayers to get the benefit of the full 180 days, they must submit a request for an automatic extension of time to file their return. Individuals must file IRS Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Tax Return”, in order to obtain the benefit of the full 180-day exchange period. Business entities must file IRS Form 7004, “Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns”. These forms can be found at the following IRS links:
For more information about IRC §1031 exchanges, please visit www.orexco1031.com or call 800-738-1031.
1The exchange period expires on the earlier of the following two dates:
(1) The due date of the taxpayer’s tax return for the year in which the property sold
(2) 180 days after the date the taxpayer transfers the property.
Therefore, if an individual, single member LLC or sole proprietorship transferred a relinquished property on any date between October 18th, 2012 and December 31st, 2012, the due date to complete the exchange is April 15th, 2013. If a partnership or multi-member LLC transferred a relinquished property between September 17th, 2012 and December 31st, 2012, the due date to complete the exchange is March 15th, 2013. To get the benefit of a full 180 day exchange period, taxpayers must file a request for an extension of time to file their return.