Key Takeaways
- Eight documents, three deadlines, and six audit focus areas define 1031 exchange compliance.
- A running basis schedule maintained across all exchanges is irreplaceable—digital backup is essential.
- Constructive receipt causes complete exchange failure—use independent QIs and safe harbor Exchange Agreement provisions.
- Always identify a DST backup—the cost of identification ($0) versus exchange failure ($50,000-$200,000+) makes this mandatory.
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Test Your Knowledge
1.Under Revenue Procedure 2008-16, what is the safe harbor holding period for a dwelling unit to qualify as investment property in a 1031 exchange?
2.What is the consequence of constructive receipt of exchange funds during a 1031 exchange?
3.An investor performs four successive 1031 exchanges over 20 years. What happens to the deferred gains from all four exchanges if the investor eventually sells the final property in a taxable sale?