09/01/2026
Lately, it feels like everyone is wheeling and dealing, even the government has a thing for making deals everywhere. Real estate Monopoly is happening in real time. People are swapping everything from traditional single family houses to mobile homes, and the IRS loves to watch. That is where a 1031 exchange comes into play.
When you start trading real estate, there will be a bunch of questions: When was the property bought? What is its actual value? How much depreciation has already been expensed? When did the trade happen, and were any improvements made beforehand?
Keep in mind: your new rental property will not inherit the exact same depreciation schedule, and remember that the land surrounding a home is never depreciable. Serious numbers need to be crunched here. Even if your trade was an entirely fair, even swap, the tax basis of your home might not equal the trade amount.
What should you bring to a tax preparer when discussing an exchange:
Preparing a 1031 tax exchange is not just popping numbers onto a tax return form like a W-2; intricate calculations take anywhere from 2 to 5 hours depending on the deal. If you want to keep the IRS from disallowing the entire transaction, you need to come prepared with the right paperwork:
Qualified Intermediary Statement: Proves you met the IRS's strict timeline guidelines.
Prior Depreciation Schedules: Essential for tracking your traded property's history.
Improvement Records: Details on any upgrades made to the old property prior to transfer.
County Tax Assessor Statements: Required for both the new and old properties.
HUD Final Closing Statements & Original Purchase Statements: To verify dates, historical figures and basis.
The bottom line is basically this, what you traded for is not automatically your new basis. Don't leave your transaction vulnerable to an IRS penalty.
Got questions about your exchange? Let’s talk strategy. 15-minute consultations are free, Document review, tax preparation and any questions there after has a consultation fee required.
Now, let’s go find a deal.
— As an Enrolled Agent, our focus is tax law.
