How and When Do You Report a 1031 Exchange to the IRS?

When you conduct a 1031 exchange, you are required to report the exchange to the Internal Revenue Service (IRS). This is the final step for claiming the indefinite tax deferral authorized under Section 1031 of the Internal Revenue Code. Learn how and when to report your exchange from the 1031 exchange specialists at 1031 National Services:

When to Report a 1031 Exchange to the IRS

We’ll start with the timing requirements—because they are fairly straightforward. When you conduct a 1031 exchange, you are required to report the exchange to the IRS for the tax year in which you sold the relinquished property involved in the exchange. This is true even if you did not complete the exchange until the subsequent tax year (which is referred to as “straddling”).

For example, let’s say you begin a delayed exchange in 2026. You sell your relinquished property in August 2026—which starts the 180-day time window to acquire a replacement property—and you close on the acquisition of your replacement property in January 2027. Since you sold your relinquished property in 2026, you would need to report the exchange with your 2026 federal return.

The IRS makes this clear in the instructions for Form 8824 (Like-Kind Exchanges), stating:

“If during the current tax year you transferred property to another party in a like-kind exchange, you must file Form 8824 with your tax return for that year.”

What happens if you don’t file in time? Failing to timely report a 1031 exchange to the IRS could result in loss of tax deferral eligibility. While it may be possible to file late in some cases, there is no guarantee that the IRS will accept a delinquent or amended filing.

How to Report a 1031 Exchange to the IRS

Reporting a 1031 exchange to the IRS involves filing Form 8824 (Like-Kind Exchanges). While Form 8824 is also fairly straightforward, taxpayers must accurately complete all relevant sections in order to secure indefinite tax deferral. Some of the key pieces of information that are required to complete Form 8824 include:

• The acquisition and sale dates of the relinquished property
• The identification and acquisition dates of the replacement property
• The taxpayer’s adjusted basis in the relinquished property
• The taxpayer’s basis in the replacement property
• The fair market value (FMV) of both properties involved in the exchange
• Gain or loss recognized on the sale of the relinquished property
• Any deferred gain or loss

This list is not exhaustive. Form 8824 also includes special reporting requirements for like-kind exchanges involving related parties. As defined in the instructions, related parties include spouses and other close family members as well as related corporations, partnerships, trusts and other entities.

In addition to filing Form 8824, taxpayers may have other filing requirements. For example, depending on the circumstances involved in a 1031 exchange, it may also be necessary to file:

• Form 4797 – Form 4797 is used to report taxable gain recognized on the receipt of “boot” in a like-kind exchange.
• Form 6252 – Form 6252 is used when treating the taxable portion of a partial like-kind exchange as an installment sale under Section 452 of the Internal Revenue Code.

This, too, is not exhaustive. After completing a 1031 exchange, taxpayers must file all necessary forms with the IRS in a timely and accurate manner. Not only could failure to do so result in the loss of tax deferral eligibility, as noted above, but it could also lead to liability for interest and penalties (among other consequences).

What About State Reporting?

In addition to reporting like-kind exchanges to the IRS, taxpayers may also have an obligation to report them to the state. Some states have tax forms comparable to Form 8824, and others have additional exchange-related withholding and disclosure requirements. As a result, when conducting a like-kind exchange, it is important to make sure you are aware of the state requirements that apply—and you may need to comply with multiple states’ requirements if your relinquished and replacement properties are located in different states.

Contact the 1031 Exchange Specialists at 1031 National Services

If you need more information about the requirements for a compliant 1031 exchange, we invite you to schedule a free consultation with 1031 National Services. To speak with one of our 1031 exchange specialists in confidence, please call 888-872-1031 or tell us how we can reach you online today.