Penalties On Failed Exchange
Posted by taxguru on February 11, 2006
Q:
Subject: Exchange Question
If a Section 1031 exchange is set up, but cancelled when one of the partners cashes out, are there any IRS penalties?
Thanks.
A:
If an exchange falls apart before being finalized, the disposal will be reclassified as a fully taxable sale, which would generally result in high taxes and possible late payment penalties. There is no separate penalty on the failed exchange itself.
Kerry Kerstetter
Sorry, the comment form is closed at this time.
Tax Guru - Ker$tetter Letter 