1031 Exchanges that Straddle Tax Years

As we enter 2023, many taxpayers will have their 1031 Exchanges that started in 2022 but will not conclude until 2023. This situation can bring up questions that need to be addressed with your tax professional.

When Do You Report Your 1031 Exchange?

Your transaction should be reported on your Federal tax return for the year in which your exchange began. If you sold your property in 2022 and you acquired your replacement property in 2023, your exchange would be reported on your 2022 tax return.

What If You Have a Failed Exchange or Boot?

If your exchange were to fail in 2023 or if you receive boot from your exchange in 2023, you may be able to report that gain under the installment sale provision under Section 453 of the tax code. There are various exceptions for installment sales, so please consult with your tax professional before assuming this course of action.

For additional information on reporting your exchange, please reach out to your tax professional or contact the specialists here at Security 1st Exchange for assistance.