← FarmCPA Home

Sometimes You Lose When You Win!

By: | Trackback URL | No Comments

April 30th, 2012

The Tax Court recently ruled in favor of a taxpayer regarding a Section 1031 exchange.  In the Reesink case (TC Memo 2012-118), the Tax Court indicated that the taxpayers were entitled to nonrecognition treatment on the purchase of a house that they ultimately moved into as their personal residence. 

Normally, you cannot sell investment property (such as farmland) and then purchase a house to live in.  This is considered to be non-like-kind property.  In the current case, the intent of the taxpayers were to purchase the house and then rent it out.  However, they were unable to get the rent they wanted and ultimately decided to sell their current home and move into the house they had just purchased as their replacement property.

The primary reason that the taxpayers won was their intent to rent the house out; however, taking this case to tax court and winning the victory probably cost them in excess of $50,o00 and many hours of effort and heartburn.

If the taxpayers had been diligent in providing the correct information to their tax preparer, most likely this would have never gone to tax court and/or  never been picked for an audit.  They never told the preparer that they were moving into the home and also under reported their rental income by over $16,000 for the year.

The bottom line is whenever you have a complicated tax situation, such as a 1031 exchange, you must review it with your tax advisor and even more importantly, provide all of the information to them so they can prepare a proper tax return.

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation.

More Posts - Website

Follow Me:
Twitter

← FarmCPA Home

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe to this blog by:

Previous Posts

Events

View upcoming speaking engagements and other networking events for Paul Neiffer and CliftonLarsonAllen’s agribusiness team.

See All

  • Twitter Feed

    When "bullish" corn reports lead to flat closes what is Mr. Market telling you. Be careful. 6 days ago

    2010 spring corn price was $3.99. Only four years ago. 2 weeks ago

    Two good days to lock in decent prices on corn and beans. Did you take advantage of the opportunity 2 weeks ago

    Very little change on corn intentions in key corn belt state. Almost all reductions in fringe states such as ND down 1 million acre 2 weeks ago

    North Dakota up 1 million Minnesota up 700k and Nebraska up 600k represent almost half of the 5 million increase in bean acres 2 weeks ago

    Just spoke for 45 minutes on new farm bill to a group of 100 Minnesota and Wisconsin Co-op board members. No one fell asleep. 3 weeks ago

    Hard to beat spring time in the Pacific Northwest. 3 weeks ago

    Kansas City can be windy this time of year. Just got done taping with a farm family. Check it out on #agday next Friday 4 weeks ago

    I think spring has sprung in our area. 1 month ago

    April hogs 116 limit up! Can they hit 120 1 month ago