1031 Exchange Agreement Form Format In Wake
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FAQ
How do you report Section 1031 Like-Kind Exchanges to the IRS? You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.
Detailed record-keeping and allowing your replacement property to have its season as an investment asset is imperative. The exchange can be disallowed if the IRS suspects that you completed the 1031 exchange, intending to move in immediately. It's best to wait at least two years.
Section 1031(f) provides that if a Taxpayer exchanges with a related party then the party who acquired the property in the exchange must hold it for 2 years or the exchange will be disallowed.
The 2-Year Holding Period Rule is part of the IRS procedures regulating 1031 exchanges. It stipulates that you must hold your Replacement Property (new property) for a minimum of two years after acquiring it.
There are certain rare exceptions to the two-year rule: if the disposition of the replacement property occurs “after the earlier of the death of the taxpayer or the death of the related person,” it may be acceptable to dispose of the replacement property within two years.
Your 1031 exchange must be reported by completing Form 8824 and filing it along with your federal income tax return. If you completed more than one exchange, a different form must be completed for each exchange. For line-by-line instructions on how to complete form, download the instructions here.
While there are no definitive rules on a holding period for a 1031 exchange property, it has made rulings indicating that a holding period of two years has been considered sufficient in order to meet the qualified use test.
A Qualified Intermediary, or QI, is an independent third party to the transaction whose function is to prepare the documents necessary to create the exchange, as well as to act as the independent escrow agent for the exchange funds.
Your settlement agent is required to submit the 1099-S upon the completion of every sale and Form 8824 is your way of notifying the IRS that you did an exchange on that sale and may have deferred your tax liability.