If you still need to file your taxes for the 2018 year, allow our team at Diversified Investment Strategies to fill you in on the required IRS forms for 1031 exchanges. Contact our team with questions or for help!
Your 1031 exchange must be filed in the year that it began. Therefore, if you began a 1031 exchange in 2018, you would report it on your 2018 taxes, even if it is not yet completed. However, if this is the case, the smartest option would be to file an extension of time to file your income tax return, so that your 1031 exchange transaction may be completed before filing.
Here’s a rundown of the most important forms to fill out when a 1031 exchange is involved:
IRS Form 8824 – This form has up to four parts. Part I asks for specifics on the like-kind exchange, such as descriptions of the property given up and the property received, and dates of when the first property was given up and when the new property was identified and acquired.
Part II asks for related party exchange information. Part III asks for the realized gain or loss, and recognized gain. This may include your gain on the sale, the adjusted cost basis, the fair market value of your relinquished and like-kind replacement properties and more. Part IV is used for a deferral of gain from section 1043 sales.
IRS Form 4797 – Or Schedule D – This form is for reporting any taxable gain. The gain must be allocated between capital gain, ordinary income depreciation recapture, Section 1231 gain and unrecaptured Section 1250 gain.
IRS Form 6252 – You may be able to report all or a portion of taxable gain under the installment sale basis pursuant to Section 453 if you accepted a seller carry back note as part of the consideration from the buyer of your relinquished property by completing IRS Form 6252. There are many exceptions, so this is something a tax advisor can assist you with.
If you exchanged between Oct. 17 and Dec. 31 and desire 180 days to complete your exchange, you must file an extension by April 15 using IRS Form 4868.
If you filed your taxes for 2018 and wish you had taken advantage of a 1031 exchange, we can help make that happen in 2019. We specialize in helping our clients with DSTs, NNNs, UP-REITs and more, in commercial and residential markets. Don’t hesitate to give us a call!