1031 exchanges and the tax man

[vic]

I always wonder how the IRS keeps track of a 1031 exchange that happened e.g. 10-20 years ago. These type of exchanges are often single events that may only happen every couple of years. Unlike business expenses these are not items that carry over from year to year until used up and are easy to follow. As a taxpayer, it is hard for me to remember the 1031 transaction and in what year. How does the IRS remember or keep track of the old stuff? Any IRS experts here?

Vicky

 

[retire@40]

Why would the IRS need to keep track of your 1031 exchange?

The burden is on you.

 

[FinanceDude]

All I can say is when the IRS failed that famous outside party audit (Price Waterhouse), their records were SO BAD Price found out that there was $65 billion in taxes they were OWED that they could not collect.........

 

[tryan]

how the IRS keeps track of a 1031 exchange that happened e.g. 10-20 years ago

They won't ... the exchange is only relevant the year it took place. Taxes are expected to be paid on the deffered $$ when the property is ultimately sold, sooo they'll just assume the entire sale is taxable - as usual - the burden of proof is on us.

As a side note, my accountant explained that IRS reviews are always 2 years behind. After that they'll only go back further if a pattern of fraud has been found.