1031 exchange question

[mircpa]

Hello all

Have this question regarding 1031 exchange. Client bought land in 2013 & sold in August 2016 for gain, replacement property bought in February 2017 (within 180 days). Funds were held in 1031 exchange.  The replacement property bought was less than relinquished property so there is recognized gain & small amount of deferred gain. I read instructions it suggest to file 8824 in 2016. My question is, it is only in 2017 I was able to find out recognized gain i.e. replacement property was less than relinquished property. Can I file 8824 in 2017 instead of 2016. I know instructions say to file in 2016 but in 2016 I would not know recognized or deferred gain, window of 180 days was not closed until end of calendar year 2016.

[Richcpaman]

You extend the return on the year of sale (2016)  Then prepare the return with the 6252 included now that the transaction has closed.  If you did not do it with the 2016 return, you have to amend and include it, along with P&I for the client.

Sorry.

Rich

 

[mircpa]

Is this construed as installment sale ? Even though client never took control of money

[mwrightea]

 

Even though new property was received in 2017 the exchange property was given up in 2016.  Consequently the 8824 needs to be filed on the 2016 tax return see line 6 instructions for 8824.  If 2016 was already filed you need to amend 2016 with the 8824 and your client will pay penalties & interest if there is taxable gain. 

Edited May 1, 2018 by jklcpa
moved reply to outside of quote box b/c nothing was quoted