Revenue Procedure 2010-14 issued March 5, 2010 creates a safe harbor for Taxpayers who were unable to complete their exchange due to the bankruptcy of their exchange company.
While this Revenue Procedure is complicated, in simple terms, the gain will not be taxable in the year of sale if the Taxpayer reports the gain in accordance with the newly created safe harbor. When the Taxpayer does receive payments out of the bankruptcy estate or other settlement, the gain will be incrementally taxable as and when received, pursuant to a ratio of the profit over the contract sale price.
The safe harbor sets forth strict criteria for eligible transactions. Taxpayers who have experienced losses due to an exchange company bankruptcy should consult with their tax advisor.
Toija J. Beutler, Esq. is Sr. Vice President/Regional Mgr. at Investment Property Exchanges Services, Inc. She can be reached at (503) 223-3911.
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