In a 1031 exchange there are two critical deadlines. First you’re going to sell your relinquished property. At the date of that closing, when the benefits and burdens of ownership shift, that is day zero for computing the 45 day identification period (in which you have to designate your replacement property) and the 180 day period to complete the purchases of all your replacement property.
But the IRS throws a curveball at us. They say “look, we don’t want to wait until next year’s tax return to figure out how this shakes out, so we’re going to shorten the exchange period to the due date for the filing of your federal income tax return.” So let’s say you start your exchange late in the year. You sell your relinquished property on December 27th. If you file your tax return on April 15th, you’re not going to get the full 180 day period because your April 15th filing deadline will be the last day of your exchange period. That’s the case unless you extend your April 15th filing deadline to say October 15th. Then you would get the full breadth of your 180 day exchange period. Many accountants and real estate agents will tell people to plan on filing an extension if you’re starting your exchange late in the year to make sure that you get the full use of your 180 day period if you’re going to need that time to complete all of your purchases.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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