Relief for 1031 Exchangers Who Got Caught in the Middle

As you know, our nation’s economy has been brought to its knees by an unprecedented number of high-level schemes that unraveled in quick succession. Bernie Madoff with his “Ponzi” scheme and last decade’s poster child for fraud, Enron Corp., may be extreme, but not unique examples of unchecked greed which left large numbers of investors broke and angry.  While some participants were aware of the risks and “rolled the dice” with their money anticipating high returns, many innocent (or perhaps naive) consumers and honest investors have been caught in the middle.

The 1031 Exchange industry had plenty of bad actors, too.  Some irresponsibly invested monies they held in trust; others shipped accounts offshore and left the country. Many investors were left holding the financial bag by having to pay tax penalties for failing to complete the exchange.  Finally, the courts are intervening and long overdue regulations are being put in place.

On March 5^th, 2010  IRS Revenue Procedure 2010-14 was enacted (for a full copy http://www.irs.gov/pub/irs-drop/rp-10-14.pdf) to provide a safe harbor for investors whose assets are being held up in bankruptcy court and tax penalties may still apply.

A word of caution from our sister company, IPX 1031 Exchange (http://www.ipx1031.com/): “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.”