Audit Representation for 1031 Exchanges
Protect Your Investment with EPC's Expert Audit Defense. Receiving an audit notice is never welcome — especially after completing a complex 1031 like-kind exchange.
But with Exchange Planning Corporation (EPC) on your side, you can face the IRS or Franchise Tax Board (FTB) with confidence. We excel in 1031 exchange audit representation, offering expert guidance, documentation, and full defense at no additional cost to our clients. If we did not prepare your exchange, we can still represent you for a fee.
Tax Audits Happen — Here's What You Need to Know
IRS and state tax audits are more common than many people realize. For example, California's FTB alone conducts over 200,000 audits annually. Most are routine, and many result in no change. However, when they involve 1031 exchanges, they can be time-consuming and highly technical.
At EPC, we transform what could be a stressful experience into a manageable one. Our goal is to help you understand the process, defend your tax position, and minimize your exposure — so you can move forward with peace of mind.
Why 1031 Exchanges Are Flagged for Audits
A 1031 exchange allows you to defer capital gains taxes by reinvesting in a new investment property. However, the IRS and FTB scrutinize these transactions due to the significant value of tax deferral involved.
Common audit triggers include:
- Incomplete or mismatched paperwork
- Valuation discrepancies
- Misunderstandings about Delaware Statutory Trust (DST) reserve funding
Even if you followed all the rules, your exchange might be selected for review — either randomly or due to perceived anomalies.
Representing Yourself in an Audit? Think Again.
If you were pulled over by a police officer, would you try to defend yourself on the spot — or call someone who understands the rules?
Tax auditors are investigators. Their job is to uncover underreported income or improper deductions. If you represent yourself, you could unintentionally say something misleading or fail to respond appropriately to documentation requests.
That's why EPC is here: to speak the auditor's language, present the correct facts, and protect your interests.
Why EPC Is Your Best Ally in a 1031 Exchange Audit
1031 Exchange Expertise
We focus exclusively on 1031 exchanges and related tax strategies. Unlike general accountants or tax preparers, we've handled hundreds of exchange-related audits and know exactly what to expect.
Audit-Ready Documentation
Our proprietary software generates detailed workpapers designed specifically for audit review. These documents demonstrate that your transaction was completed correctly and help prevent further scrutiny.
Audit Assurance Warranty
If we planned your exchange, you're covered. Our Audit Assurance Warranty means we'll represent you in any IRS or FTB audit related to that exchange — at no extra cost. This unique service gives our clients true peace of mind.
End-to-End Communication
We handle every interaction with the IRS or FTB — from written responses to phone calls and meetings. You'll stay informed, but you won't be put on the spot.
Strategic Defense Planning
Some audits are best resolved by presenting comprehensive documentation. Others require negotiation or clarification of DST-specific concerns. We tailor our approach to your situation.
Backed by Insurance
Our Audit Assurance Program is supported by $2,000,000 in Errors & Omissions professional liability insurance.
This provides you with financial protection and demonstrates our confidence in the quality of our documentation. We don't just say we'll stand behind our work — we're insured for it.
E&O coverage applies to documentation errors and omissions. Coverage details available upon request.
Sleep Well
Know that if questions arise, experts who know your exchange inside and out will handle it.
Get ProtectedReal-World Audit Example: The DST Reserves Misunderstanding
One common audit pitfall involves Delaware Statutory Trust (DST) reserves. Some auditors mistakenly believe that reserves — shown on "Use of Proceeds" tables — are taxable boot. This is incorrect.
EPC helps clarify that:
DST reserves are pre-funded by the sponsor.
Reserves are not paid using your exchange proceeds.
Therefore, they are not taxable as boot.
Our detailed documentation and clear explanations help auditors understand these nuances and reduce the likelihood of negative audit outcomes.
What Happens During a 1031 Audit?
Here's how we guide you step-by-step:
We Review Your Exchange
We reconstruct the transaction with audit-level documentation.
We Submit the Right Evidence
We respond to all information requests with exactly what the auditor needs.
We Manage the Conversation
We handle every interaction and, if needed, escalate to the auditor's supervisor or appeals.
We Defend Your Return
Whether it's providing full support, addressing minor adjustments, or negotiating penalties, we stand by your side.
Audit representation is both an art and a science — and EPC has mastered both.
How to Get Audit Protection
Audit Assurance Program is automatically included with our Exchange Documentation Service. When we document your exchange, you're covered — no additional signup or fee required.
Already Facing an Audit?
If we did not prepare your exchange, we can still represent you for a fee. We can review your exchange documentation, identify the best defense strategy, and provide representation services.
Contact us immediately if you've received an IRS notice — time is often critical in audit situations.
Contact Us About Your AuditYou're Not Alone — EPC Has Your Back
Audit notices can be unsettling — but with Exchange Planning Corporation, you're never alone. We remain your advocate long after the transaction is complete. With our Audit Assurance Warranty, our audit-ready tools, and our specialized 1031 knowledge, you gain more than a tax strategy — you gain a shield against uncertainty.