1031 Exchange Compliance
Politically, Congress is unwilling or unable to significantly increase tax revenues for the past several years. As a result, the IRS has devised a series of strategies designed to raise $300 billion in tax revenues from areas of non-compliance. Primary areas of non-compliance include the failure to report sales of used equipment and non-compliant 1031 exchanges.
- All exchanged assets must be reported on Form 8824.
- Enhanced reporting on income tax returns designed to provide consistent and uniform disclosure. Companies are required to disclose uncertain and/or aggressive tax positions, on new schedules UTP and M-3. Partnership Returns are now required to disclose distributions in connection with 1031 exchanges.
- Book income includes gains from the sale of all assets and is unaffected by a Section 1031. All transactions must be reported as gain from the disposition of assets and differences between book and taxable income must now be highlighted on both tax returns and financial statements;
- Enhancements to civil and criminal tax penalties for taxpayers and tax advisors;
- Continued success in the courts continues to strengthen the enforcement of 1031 exchanges.
- Newly enacted whistle blowing statutes now provide a 15% to 30% award for disclosure to the government of failure to properly report taxable income.
- Increased Section 1099 reporting for the sales of tangible property to track down the estimated $300 billion in annual equipment sales not being properly reported.
Continuous Multi-Asset Exchange Programs (CMAES) provide a tax compliant, safe and secure exchange program that significantly reduces overall equipment costs by reinvesting 100% of sale proceeds into new productive equipment and reducing income taxes, debt, interest and taxes paid on operating cash used to pay debt expenses.