1031 Exchange Documentation
Many real estate investors believe their 1031 exchange is complete once the property officially closes. However, there's a crucial, often overlooked, final step known as exchange documentation.
Exchange Planning Corporation (EPC) specializes in this meticulous post-closing analysis to ensure your tax savings are fully protected and accurately reported to the IRS. Over the past four years, EPC has helped clients recover an average of $1.5M per year in missed depreciation deductions.
An investor's accountant flagged $50,000 in potential taxable boot from closing statement adjustments. After our review, we demonstrated those prorations were offsets—not taxable.
Result: ~$15,000 in taxes avoided.
What's Included
Exchange documentation is the thorough analysis and precise recording of all financial details related to your 1031 exchange. It's essentially the process of creating a detailed financial summary for your exchange, akin to a Form 1099 for other transactions. In today's tax environment, professionals are accustomed to working with information returns like Form 1099s. Our comprehensive documentation provides your tax professional with a clear, familiar format, enabling them to report the exchange accurately and efficiently.
- Comprehensive Review of Closing Statements
We scrutinize every credit and debit, including prorations of rent or taxes, loan payoff amounts, and various fees.
- Accurate "Cash Received" and "Boot" Calculation
We accurately determine "boot," which represents any value received that doesn't meet IRS requirements for complete tax deferral. Our goal is to manage boot properly and to maximize deductions and tax savings.
- Adjusted Basis Calculation
We calculate the adjusted basis of your newly acquired property, which is crucial for determining your future tax deductions for depreciation.
- Depreciation Optimization
Our software projects the income from your replacement properties and compares multiple depreciation methods to ensure your depreciation is calculated to maximize your tax savings now and in the future.
- Pre-funded Reserve Treatment
We confirm that DST reserves, typically pre-funded by the sponsor, are not classified as boot, preserving the tax-deferred status of your exchange.
- Audit Assurance Warranty
We are so confident in our work that our audit assurance warranty provides you with complimentary audit representation if your exchange is audited.
Why Documentation Matters
While a Qualified Intermediary (QI) facilitates the exchange, they do not prepare your tax reporting. Furthermore, many experienced tax professionals, if they don't frequently handle 1031 exchanges, may lack the specialized knowledge to capture every nuance from exchange documents.
EPC steps in to bridge this critical gap, ensuring that every tax-deferred dollar remains deferred and all deductible expenses are properly claimed.
Ready to get started?
Flat fees based on your closing statements.
Consultations are always free.
"Because of Exchange Planning Corporation's work, I received $105,000 in carryover depreciation to offset future passive income—something my accountant wouldn't have known to look for."— Paul
Why Choose Exchange Planning Corporation?
Navigating the complexities of 1031 exchanges requires specialized expertise that goes beyond general tax knowledge.
Unparalleled Specialization
We are THE experts solely focused on 1031 exchanges, bringing a deep understanding of their nuances that even competent tax professionals may lack.
Proprietary Software
We utilize unique, advanced software designed by us specifically to calculate exchanges, run projections, and forecast potential outcomes — a tool unparalleled in the industry.
Expert Document Interpretation
Our specialists excel at accurately interpreting complex documents like escrow statements, ensuring that all data inputs are precise and reliable, avoiding the "garbage in, garbage out" scenario.
Personalized Approach
We analyze your individual circumstances and provide tailored advice and strategic recommendations to help you navigate your unique situation effectively.
Quick Answers for Real Estate Investors
These are the most common tax questions we see from investors before their CPA files the return.
How is basis calculated after a 1031 exchange?
Learn how carryover basis, boot, and adjustments affect future depreciation.
Read articleWhat counts as taxable boot?
A plain-English breakdown of cash received, offsets, and common misclassifications.
Read articleHow should Form 8824 be completed?
The reporting basics your CPA expects, plus the fields that commonly go wrong.
Read articleWhat are the 45- and 180-day deadlines?
A timeline view of decisions, identification rules, and what can break the exchange.
Read articleHow does depreciation recapture affect taxes?
Understand recapture risk, reporting, and how proper documentation protects you.
Read articleWhat should DST investors watch for?
Reserve treatment, loan-to-value impacts, and common reporting mistakes.
Read articleExchange Documentation Deep Dive
Understand what exchange documentation is, why it matters, and the risks of skipping it.
What Is Exchange Documentation?
Many investors think their exchange is complete at closing. Here's why that's a costly misconception.
Read articleWhy Proper Documentation Matters
It's not just about avoiding tax surprises—it's the key to maximizing depreciation and long-term savings.
Read articleThe Risks of Skipping Documentation
From surprise tax bills to lost deductions—understand what's at stake if you skip this step.
Read articleDon't Let a Documentation Oversight Cost You
Your 1031 exchange is a powerful opportunity to defer taxes and enhance your investment portfolio. Don't let a critical oversight in documentation undermine your success. By partnering with Exchange Planning Corporation, you're securing a safeguard for your investment.