The Internal Revenue Service March 5 issued Revenue Procedure 2010-14, which provides a safe harbor method of reporting gain or loss for certain taxpayers who initiate deferred like-kind exchanges under tax code Section 1031 but fail to complete the exchange because a qualified intermediary defaults on its obligation to acquire and transfer replacement property to the taxpayer.

IRS said that if a taxpayer meets the requirements of the revenue procedure, the service will not treat the taxpayer as being in actual or constructive receipt of exchange proceeds if the taxpayer does not complete an exchange because of a default of a QI that becomes subject to a bankruptcy or receivership proceeding.

A taxpayer reports gain under the revenue procedure on the disposition of relinquished property as the taxpayer receives payments, IRS said.

Rev. Proc. 2010-14 will be published in Internal Revenue Bulletin 2010-12, dated March 22.