Dear qbteachmt,

            You advised: Your taxpayer is getting the money (violating 1031) by assuming the debt. Carrying the note means there is principal payment portion to your taxpayer. That's why sjrcpa mentioned failed exchange. You also have to know what the gain was on the sale; not just the sale price.

            The client has as a remaining un-depreciated basis of $4,391. The sale was for $4mil. After expenses of the sale, the gain is $3,788,941. Then the Intermediary fee was $1,250.

            How do I now report this? Notify my client that the property purchased does not qualify as a 1031 Exchange for rental property and that the entire gain of $3,788,941 needs to be reported? May I subtract as expense of the sale also the intermediary fee was $1,250? What forms do I use to report the sale now, and the mortgage of $3.5mil on, just the Form 6252? What else do I need to do as it is a failed exchange by violation? I sincerely appreciate the answers to help me in what has been a quagmire for me. I have attempted to read and get answers but so far have not. I am very thankful for “companions for the journey”. God is good! Always                                                      robert-a