How and When Should I File Taxes with a 1031 Exchange?

David Moore: Hello, David Moore, Equity Advantage, and today we’re going to talk about when you should file your tax return. And the reason we’re going to talk about that is it’s January 21st of 2021, and number one, I don’t want to have any of my clients have a problem because of this, but I don’t want any of you out there to have a problem with this issue.

So if you read Section 1031, timelines are the biggest headache with any Exchange. You’ve got 45 days from settlement to identify what you’d like to acquire. You’ve got a total of 180 days from that settlement date to complete the Exchange. So it’s not 45 and 180. It’s 45 with a total of 180. But if you read the fine print, it’s 180 days or the due date of your tax return.

David Moore: So imagine you’re one of those overachievers. I’m never at risk in this situation because unfortunately, my tax life’s complicated enough where it never gets done by April 15th. We’re always filing extensions which leads me to the big suggestion. Anytime we’re just starting transactions late in the year, or anytime we’ve got a transaction that’s going to be impacted, going to be traveling into the next year, we need to make sure that you complete the Exchange prior to filing the tax return for that year.

So if we look at somebody that didn’t Exchange set it up anywhere late in the year in 2020, we do not want them to file a return until they’ve completed acquisition of everything they’re going to be buying. If they file the return, you’ve already, not artificially, you’ve actually done it. You’ve just terminated your Exchange period.

David Moore: And in 30 years of my time in the business, I’m only aware of one of my clients ever that had this as an issue. And what happened is the client… there were two partners. The client that we do all the work with was controlling everything, but the other partner did the tax return. And I got a call in January or February that the partner had filed a return, and we were done dead in the water with the Exchange.

So once again, if you’re an Exchange from late in the tax year, complete the Exchange prior to filing your return. If you’re bumping up until April 15th, you’re going to want to file an extension. Get it done prior to filing the return.

David Moore: So hope that helps. If you’ve got further questions on that topic, please give us a call and get good tax people out there. Very, very important to your life. And as we get a word on changes in Biden’s tax plans, we’re going to be getting that information out immediately. And I think once again, who’s going to get that information to you, we’re going to get it out as fast as we can, but your tax people are critical to your success, your investment success. Use them, get good ones, and use them often.

David Moore: Thank you very much for your time today. David Moore, Equity Advantage, 1031Exchange.com. Bye bye.