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yuchun2000
New Member

I had an 1031 exchange. I received 1099-misc for some fund as option payments before property sold. The fund returned back escrow to qualify 1031. How to report this1099?

I sold a piece of vacant land to a company. The contract was signed in 2015, and I received some option payments as part of contract. However, the buy decide not to report to IRS until the transaction is completed. In 2017, transaction has been completed, and I have returned the option payments fund to escrow, and escrow forwarded this fund and the rest of sell amount to a 1031 exchange company. 

How I have received 1099-misc form with BOX 3 filled. How shall I report this 1099-misc along with 1031 exchange in TT?

1 Best answer

Accepted Solutions
ToddL
New Member

I had an 1031 exchange. I received 1099-misc for some fund as option payments before property sold. The fund returned back escrow to qualify 1031. How to report this1099?

To report the option payments "income" and "return to escrow":

Enter the information as follows in the 1099-MISC interview:

  • Enter the 1099-Misc in the Other Common Income section (Enter "1099misc" in the Search Box and Select "Jump to 1099misc")
  • For "Description", enter "1031 Contract - Deposit"
  • Also check that it does not involve work like your main job, that it did not involve an intent to make money, and is not a recurring payment (received in the past or expected in the future) (these questions only apply to active, not passive, income).
  • The "income" will be reported on line 21 of your return.

To enter the "return to escrow" expense:

  • Go to Less Common Income, Miscellaneous Income and Other reportable income (enter "other reportable income" in the Search Box and Select "Jump to other reportable income")
  • Continue to the screen "Other Taxable Income". Enter the description as "Refund of 1031 Deposit" and the amount as a negative number. These are NOT wages.

A corresponding negative amount will be entered, and line 21 will be zero. See the attached screenshot example (different descriptions, but still offsetting).

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2 Replies
ToddL
New Member

I had an 1031 exchange. I received 1099-misc for some fund as option payments before property sold. The fund returned back escrow to qualify 1031. How to report this1099?

To report the option payments "income" and "return to escrow":

Enter the information as follows in the 1099-MISC interview:

  • Enter the 1099-Misc in the Other Common Income section (Enter "1099misc" in the Search Box and Select "Jump to 1099misc")
  • For "Description", enter "1031 Contract - Deposit"
  • Also check that it does not involve work like your main job, that it did not involve an intent to make money, and is not a recurring payment (received in the past or expected in the future) (these questions only apply to active, not passive, income).
  • The "income" will be reported on line 21 of your return.

To enter the "return to escrow" expense:

  • Go to Less Common Income, Miscellaneous Income and Other reportable income (enter "other reportable income" in the Search Box and Select "Jump to other reportable income")
  • Continue to the screen "Other Taxable Income". Enter the description as "Refund of 1031 Deposit" and the amount as a negative number. These are NOT wages.

A corresponding negative amount will be entered, and line 21 will be zero. See the attached screenshot example (different descriptions, but still offsetting).

yuchun2000
New Member

I had an 1031 exchange. I received 1099-misc for some fund as option payments before property sold. The fund returned back escrow to qualify 1031. How to report this1099?

Great professional answer! Thank you so much! "negative number" and "NOT wages" are very important.
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