The IRS issued the long awaited guidance in the form of Revenue Procedure 2010-14, that provided a much-needed safe harbor for reporting gain or loss for some taxpayers. Affected parties are taxpayers who initiated 1031 Exchanges but failed to complete the exchanges because the qualified intermediary (QI) defaulted on their obligation to acquire and transfer replacement property to the taxpayer.

The IRS's ruling says that if the exchangor meets the various requirements of the Rev. Proc. 2010-14, the taxpayer will not be treated as being in actual or constructive receipt of his or her 1031 Exchange funds due to their Qualified Intermediary defaulting on their 1031 Exchange oblibations (becoming subject to a bankruptcy or receivership proceeding).

You can read the full press release here: http://www.exeter1031.com/news_failed_1031_exchange_due_to_qualified_intermediary.aspx