When a 1031 exchange crosses over from one tax year to the next, it creates a unique scenario called a “tax straddle.” This strategy can offer valuable, short-term deferral benefits for exchangers when a property sale and replacement purchase are not completed within the same tax year. With tax straddles, certain gains from a failed or partially taxable exchange can be deferred into the following year. However, tax implications can be nuanced, particularly with factors like cash and debt boot or IRS installment sale rules.

In his latest article, “Tax Straddles – Navigating the Complexities of an Exchange Spanning Two Tax Years,” Legal 1031’s General Counsel, James T. Walther, Esq., LL.M., dives into the ins and outs of 1031 tax straddles and explores the timing, reporting, and debt-related considerations exchangers should keep in mind. This in-depth guide addresses both individual and partnership considerations, including options for tax return extensions and IRS requirements for installment reporting.

For a comprehensive look into how tax straddles could impact your exchange transactions, read the full article here.

As always, consult your tax or legal advisor for personalized guidance on structuring your 1031 exchange.

Legal 1031 Exchange Services LLC does not provide tax or legal advice, nor can we make any representations or warranties regarding the tax consequences of any transaction. Taxpayers must consult their tax and/or legal advisors for this information. Unless otherwise expressly indicated, any perceived federal tax advice contained in this article/communication, including attachments and enclosures, is not intended, or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.

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