When an Exchange Straddles Two Tax Years
As we begin another new year, many Exchangors will find themselves with an exchange that straddles two tax years. That situation usually leads to one of two questions:
- My exchange was a success, but what year do I use to report the transaction?
- My exchange failed. I got my money back, but when do I report the gain?
The first question is easy. The exchange is reported on IRS form 8824, for the tax year in which the relinquished property was transferred. So, for an exchange that began in 2021 and concludes in 2022, the transaction is reported on the taxpayer’s 2021 tax return. If there are unused exchange funds, or “boot”, the receipt of such funds can be reported on the 2022 tax return, using IRS form 6252.