Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Retroactive Exchange?

Posted by taxguru on August 3, 2006



Subject: Exchange Question
Do you know whether a 1031 exchange can be made retroactively,  assuming both parties agree?  I have searched and cannot find 
anything specific to this issue.  It appears as though it is likely  to be ok, as long as the relinquishment of property has not yet occured.

My Reply:

You need to be a little more specific with the situation you are trying to describe.

If a property was already sold and the seller received the proceeds, then it is impossible to go back and change that transaction to a 1031 exchange.

If the disposal transaction is still in escrow and title hasn’t passed yet, the deal can be converted into a 1031 exchange.

Let me know if neither of those situations cover what you are faced with.

Kerry Kerstetter


Thank you for the quick reply.  The property has not bee sold and is  not in escrow currently.  Basically my company and the seller would 
like to back date (for lack of a better explanation) the transaction,  as if the 1031 took place earlier this year.  I’m not aware of any  other details.  It sounds to me like this is reasonable, as long as  both parties agree to “backdating” within the requirements of 1031 &  reg 1.1031(k)-1(b).


You obviously must have some reason for wanting to do this. However, pretending that a transaction took place before it actually did sounds too much like fraud to me to be able to accept it as proper.  Just because both parties agree to it doesn’t make it any more legitimate. I can’t see the IRS ever accepting this as valid either.

You would be best to do the swap now and use the current date.

Good luck.

Kerry Kerstetter


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