1033 Exchanges

From time to time, it happens that a property owner experiences an event outside of the owner’s control. Typically, these are unfortunate events that result in serious damage or destruction of commercial, industrial, or residential property. This includes issues caused by natural disasters such as earthquakes, tornadoes, hurricanes, or wildfires. Other situations include when a property is condemned or seized by the government as part of an eminent domain action. When these events occur, the property owner typically receives a settlement amount from an insurance company or government entity. While the payout is certainly welcome it can create unexpected and significant tax issues. In these circumstances, it is useful to conduct a 1033 exchange which will allow for tax deferral until a replacement property can be identified.

Navigating a 1033 exchange? Let’s talk strategy before you reinvest.

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How JLK Rosenberger Can Help

A 1033 (involuntary) exchange is essential because it allows for a transfer of capital gains taxes. It is an especially useful tax strategy to help those facing an involuntary conversion on property that has appreciated over time. It also allows taxpayers to reinvest proceeds from a current to similar property, offers a flexible timeline to find a replacement property, and allows for direct control over funds during the search period. When combined this provides property owners with a compelling way to defer taxes and identify a suitable replacement property.

JLK Rosenberger has significant experience conducting 1033 exchanges (involuntary conversions). We have worked with dozens of property owners through the unexpected to manage capital gains tax through tax compliance and reporting, to identification of the replacement property. Our unique combination of technical knowledge and practical experience translates into significant value. Whatever your situation, JLK Rosenberger stands ready to assist.

1033 Exchange Services

Eligibility Overview – In this step, the focus is on determining that your situation qualifies to conduct the exchange. Our team reviews the property basis and compensation received and calculates the potential capital gain and the amount needed for a full deferral.
Replacement Property Guidance – Our team reviews the specific details about selecting a replacement property including the “similar or related in service or use” standard for replacement property. This ensures the new asset qualifies for the exchange. While you focus on finding new property, our team ensure your selection aligns with requirements.
Timeline Management – Our team works to ensure the critical replacement period (2 years for destruction and 3 years of condemnation) are followed. We also assist with documentation and strategies to maximize time for replacement.
Tax Reporting – In this step, our team prepares and files all necessary documents with the IRS including Form 4797 (Sales of Business Property) and other required documentation. For those who have already paid tax on a gain but are still in the replacement period timeline we can help recover those taxes.
Basis Adjustment – Finally, we calculate the adjusted basis of the new property including the deferred gain. Our team will also provide guidance about the most appropriate depreciation method for your new property.

Navigating a 1033 exchange requires precise execution and detailed tax knowledge. For this reason, it is important to consult with a qualified tax advisor to provide the clarity, guidance and strategic advice needed.

Interested in learning more? Contact us today to discuss how we can help with your situation.

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I finally have Peace of Mind. After years of frustration working with other firms, I am so delighted at JLKR’s service. They are proactive, responsive, and experts, which allows me to focus my time on leading and running our business.

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