first problem with the scenario is that a section 1031 exchange is recognized ONLY when completed. The basic exchange is a simultaneous transfer of the relinquished property for the new property. In actual fact most exchanges are delayed and/or delayed reverse exchanges. You sold the relinquished property through transfer to a qualified intermediary and acquired the new property again hroughthe same intermediary. -- thus ineffect creating a simultaneous exchange from your persepctive. The easiest way to clear this up is to (a) do the 2017 return as if the exchange occured in Jan of 2017 ( that is factually correct ). This will allow all the basis information to flow properly. (b) go back and amend the 2016 filing by removing the exchange details ( relinquishing portion ). The books would then be correct, even though there should not be any tax implications. That is my view.
