Many investors are unsure of how long they should keep their tax records pertaining to a 1031 Exchange. Do you hold them for a few years, 10 years, or forever? We'll discuss how long to keep your tax documents when you engage in this type of transaction.
What Is a 1031 Exchange?
A 1031 Exchange is a way to defer taxes on the sale of an investment property by reinvesting the proceeds into a new, “like-kind” property. The exchange must be for investment or business purposes only, and you must identify potential replacement properties within 45 days of the sale and complete the purchase within 180 days.
How Long Should You Keep Records Pertaining to the 1031 Exchange?
In the event of an audit, it's wise to keep your tax records for at least seven years. However, there is no arbitrary rule about how long you should save tax documents and tax professionals will tell you that you should preserve your tax records indefinitely if possible. With cloud-based storage, this is easier than ever to accomplish-- while taking up zero room in your office or basement!
What Other Records Should I Keep?
Again, in the event of an audit, it will also be helpful to have copies of all contracts and listing agreements. You should also retain a copy of your final settlement sheet that is provided to you at closing.
Have Questions about the 1031 Exchange Process?
We are here to offer guidance and assist you with aspects of the 1031 Exchange process. If you have questions or need help getting started, please contact us at (888) 508-1901 to schedule a consultation.