1031 Exchange Blog
In this 1031 FAQ video, Jeff Peterson lays out the two most important deadlines you need to abide by in a 1031 exchange. Watch more 1031 educational videos here.
Start Your 1031 Exchange: If you have questions about 1031 timeframes and deadlines, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2016 Copyright Jeffrey R. Peterson All Rights Reserved
Let’s talk about the timeline for a typical 1031 exchange. For simplicity, we have broken the timeline down into a handful of stages.
The first stage of the transaction is the sale and marketing of your old relinquished property.
Once you have found a buyer, a closing occurs. This closing is day zero in your 1031 exchange. We draw a line out from that date to 180 days thereafter. That is the total timeframe that is available to you to complete your 1031 exchange.
But within that timeframe the first 45 days are called the identification period. In the 45 day period, you have to make a written designation or identification of your replacement property. Any properties that you purchase during that first 45 days are deemed to be identified because you closed on them, you own them.
However, any properties that you are going to buy in the remaining 135 days will not be considered like kind unless they were designated and identified during the first 45 days.
Most taxpayers work really hard to sell their relinquished property, then they work really hard during the 45 day period to designate their three best guesses, crossing their fingers that they’ll be able to close on one or more of those properties in the remaining 135 days.
All of this is stressful. But knowing the deadlines in advance allows you to work ahead on these benchmarks. Wouldn’t it be nice if you entered the identification period with a replacement property in your sights or locked up with a purchase agreement? These deadlines are strictly enforced, so thinking ahead like a chess player will help you navigate the 1031 process with as little stress as possible.
Start Your Exchange: If you have questions about the 1031 exchange timeline, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2016 Copyright Jeffrey R. Peterson All Rights Reserved
In a 1031 exchange there are two critical deadlines you need to know about:
The 45 Day Identification period
The 180 Day Exchange Period
When you begin a 1031 exchange, the day of closing is considered day zero. After that you have 180 days to complete your exchange. But the critical time frame is the first 45 days of that 180 day period because that’s the time you have to designate (or identify) your replacement property or properties. Determine your 45 day / 180 day deadlines using our calculator.
This all sounds simple – 45 days to identify, 180 days to complete, with both clocks running concurrently. But wait a minute. The IRS throws you a curveball. They say:
“We don’t want to wait until next year’s tax return to see the full picture. We want this all reported to us on one tax return.”
So you might have 180 days to complete your exchange, but if your deadline for filing your federal tax return (April 15 for individuals, March 15 for corporations) pops up within that 180 day period, they shorten your 180 days to your federal tax filing deadline. That’s a big trap for the unwary. But it’s an easy problem to sidestep.
All you need to do is ask your CPA to file for an extension of your federal filing deadline. For example, an individual who files on April 15th can get an automatic extension of the deadline to October 15, thus enabling them to use all of their 180 day exchange period.
Start Your 1031 Exchange: If you have questions about 1031 time frames, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2016 Copyright Jeffrey R. Peterson All Rights Reserved
Many taxpayers and their advisors have questions about the rules for identifying replacement property for a 1031 exchange. For a copy of the Treasury Regulation 1.1031(k)-1(b) and (c) check-out our Library of 1031 resources.
Here is a quick primer on the identification rules of a 1031 tax exchange.
After the closing of your old relinquished property you will have until midnight of the 45th day thereafter to designate (identify) in writing what replacement properties that you want to receive to complete your 1031 exchange. If you do not send your written designation within that time, your exchange may fail, so it is very important to keep track of this deadline. You can run a calculation of your 45 day identification deadline and your 180 day exchange deadline by going to our 45 / 180 Day Calculator.
Any replacement properties that you close on and receive within the first 45 days are deemed to have been identified by virtue of the fact that you bought it. So one way to eliminate the stress of having to make an identification is to have the purchase of your new replacement property lined-up to close quickly after the closing of your old relinquished property. However, if for some reason you encounter an unexpected delay with your replacement property (that could extend the closing date beyond the 45th day), it is advisable to fill out and send in an identification just to be on the safe side.
If you do not make a written designation within the 45 day identification period (or do not actually receive your replacement property by closing on it within the 45 days), then your exchange will end, and your qualified intermediary will have to return your 1031 exchange funds back to you.
Start Your 1031 Exchange: If you have questions about 1031 identification rules and real estate in Minnesota, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
