Form 1099-S for 1031 exchange

[Allen B.]

Hi All, got a bit of a last-minute issue here.

I'm closing on a number of properties over the next three days. The proceeds are being swept together into a 1031 exchange. My question is about how to complete the Form 1099-S that's required.

So far, the closing firms (in Georgia) are putting the proceeds of the sale in Box 2. However, the IRS instructions and a few Google searches seem to say that in the case of a 1031, maybe this should be $0? Here is the text below: (it's the 2021 form but presumably identical)

2021 Instructions for Form 1099-S

If you are reporting a like-kind exchange of property for which
no gross proceeds are reportable, enter -0- (zero) in box 2 and
enter an “X” in the checkbox in box 4.

Can anyone with some 1031 experience clarify this for me? My 1031 provider says that because it's not part of the exchange itself, that they cannot advise, etc, etc.

Thanks,
Allen

[Dave Foster]

@Allen B., Don't want to step on the toes of your QI.  But since they're unwilling to step out on the ledge with you ...:). either scenario is common.  If an amount is filled in with the proceeds then it is reconciled by your accountant on the form 8824 that is filed by your accountant for the tax year of the exchange.

What is a golden opportunity for you now that your QI hasn't told you is that you would prefer $0 because that could allow your accountant to report this as an installment sale in 2020 if you can't complete your exchange.

Your exchanges are commencing in 2020.  That means they will need to be reported on your 2020 tax return.  If you cannot find suitable replacement properties then do not turn in a 45 day identification form.  Your exchange dies on day 46. But this is in 2021.  So your accountant can report that sale as an installment sale with $0 received and all of the cash coming to you in 2021.  Which means you don't have to pay the tax until 2022.

Just a little obscure tip that might help you.