The 45 Day Identification Period in a 1031 Exchange

Identifying replacement property is an important aspect of any 1031 exchange. In this article, we are going to discuss the relevant rules and tips for identifying replacement property in a 1031 exchange.

Identification Rules

Any replacement properties received within the 45 day identification period are deemed to have been identified. Replacements received after the 45th day must be properly identified in writing during the 45 day identification period. You only need to satisfy one of these rules :

• 3-PROPERTY RULE: Identify three or fewer replacements. Most common Identification rule utilized.

• 200% RULE: Identify any number of replacements; however, the total value of those properties identified may not exceed 200% of the value of your relinquished property.

• 95% RULE: Identify any number of replacements as long as you end up receiving at least 95% of the value of all properties identified. Note: This rule is not used very often.

Consequences of Conducting a Partial Exchange and Receiving a Portion of the Proceeds or Other Property

If you receive money or non like-kind property (“boot”) in an exchange on which you realize a gain, you have a partially nontaxable exchange. You are taxed “dollar for dollar” on the gain you realize, but only to the extent of the money and the fair market value of the non like-kind property that you receive.

Need Help With Your Commercial Transaction?

Are you struggling with the details of your commercial real estate transaction? We’re here to help. The experts at CPEC1031 have decades of experience in the commercial title industry. Our team consists of underwriters, title closers, escrow agents, and more who are ready to guide you through the specifics of your transaction. Reach out to us today at our office in downtown Minneapolis to learn more about our services, capabilities, and how we can help you through the details of your transaction.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Is It Possible to Change Your Identified Property After Day 45 of Your 1031 Exchange Period?

Many taxpayers have questions about the identification period in a 1031 exchange. In this article, we are going to tackle the question of whether or not you can make changes to your identified replacement property after the 45th day of your exchange.

Identification Rules

The quick and easy answer to this question is no. After the 45th day of your identification period, you cannot make any changes to your identified property without cannonballing your exchange. That means you cannot identify new property, or change anything about the property you previously identified. The identification period rule is hard and fast – the IRS doesn’t allow any wiggle room on it.

Plan Ahead

The strictness of this rule further underlines the importance of planning ahead when it comes to your 1031 exchange. 45 days is not a lot of time. You want to make sure you have all of your ducks in a row before you begin the exchange process. You can also lock in your replacement property first, before selling your relinquished property, by doing a reverse exchange. Whatever you’re considering, it’s a good idea to consult with a qualified intermediary about your options and the best course of action.

Contact Us Today

A 1031 Exchange can help you defer capital gains taxes when selling real estate. The best news is that this section of the Internal Revenue Code is available to all United States taxpayers. The qualified intermediaries at CPEC1031, LLC can help you through all the stages of your exchange. Give our intermediaries a call today to learn more about the various services we offer and how we can help you save money on taxes. Our office is located in downtown Minneapolis, but we provide services to clients in many states.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Explaining The 1031 Identification Period & Exchange Period

There are two timelines that must be followed for a 1031 exchange to be successful.

Identification Period

This is the period during which the party selling the property must identify other replacement properties that he proposes to buy. It is scheduled as 45 days from the day of selling the relinquished property. The 45 days timeline has to be followed under any and every circumstances and is not extendable even if the 45th day falls on a Saturday, Sunday or any legal holiday.

Exchange Period

This is the period within which the person who has sold the relinquished property must receive the replacement property. It ends at 180 days after the date on which the person transfers the property relinquished or the due date for the person's tax return for the taxable year in which the transfer of the relinquished property occurred. According to 1031 exchange rule about timelines this 180 day timeline has to be adhered to under any circumstances and is not extendable even if the 180th day falls on a Saturday, Sunday or any legal holiday.

Property Exchanges Under Section 1031

Under section 1031 of the Internal Revenue Code, any US taxpayer is able to defer their capital gains taxes on the sale of real estate, provided they meet the requirements. The best way to ensure that you meet all of the necessary requirements is to consult with a 1031 exchange facilitator. At CPEC1031, our intermediaries have two decades of experience working with taxpayers on their exchanges. Contact us today to learn more about our services and get your exchange up and running!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved