Atlanta Deferred Exchange
The ADE Difference


Atlanta Deferred Exchange

Which Year Do I Report My Sale to the IRS?



Q: I sold my property in September, 2011 and planned to do a 1031 exchange.  However, I did not acquire any property and eventually received  my sale proceeds back from the qualified intermediary in March, 2012.  Do I report my gain on the sale of my relinquished property in the year I sold it (2011) or in the year I received the cash (2012)?


A: It depends on the unique details of your situation. Under the installment sale tax reporting rules outlined in IRC Section 453, you may be able to report the gain in the year you received the cash (2012).  But, if you had any recapture of depreciation or a mortgage that was paid off on the relinquished property, you may still have to report certain tax consequences in the year it was sold (2011).  Please seek the advice of your tax professional on how to report the transaction if the relinquished sale and receipt of exchange proceeds straddles tax years.