Are the 1031 Exchange Deadlines Absolute?

In a 1031 exchange, there are two deadlines you need to be aware of:

• 180 Day Deadline. This is the total amount of time you have to complete your exchange from the sale of your relinquished property to the acquisition of your replacement property.

• 45 Day Identification Deadline. The first 45 days of your 180 day exchange period are set aside as your identification period. During this time you must give written identification of the replacement properties you intend to use.

Many people wonder just how strict these deadlines are. Is there any room for extensions when it comes to these timelines?

In general, these deadlines are hard and fast. However, there are some rare instances in which they can be extended. During a federally declared disaster (such as a forest fire, hurricane, or the like), there’s usually an extension allowed for those who are adversely affected by the disaster. For example, if the title company you’re using to close your replacement property is under two feet of water due to a hurricane, then you’re likely entitled to do an extension on your 1031 exchange.

Apart from federally declared disasters, there really aren’t any options for extending your 1031 exchange deadlines.

Facilitating Exchanges Across the United States

For first-timers, a 1031 exchange can seem like a big step. At CPEC1031, LLC we make things as easy as possible and put your mind at ease throughout the process. We can help you get your like-kind exchange of real estate off the ground today. Contact us to set up a time to chat with one of our qualified intermediaries about your next like-kind exchange. Our primary office is located in Minneapolis but we work on exchanges throughout the United 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

How Does the 45-Day Identification Period Work When Selling Multiple Properties?

If you sell three relinquished properties and do a 1031 exchange for a single replacement property, are there any changes to the 45-day identification period?

The answer all depends on your state of mind. If you are selling three properties all at once to a single buyer under a single purchase agreement, then that would likely be considered a single exchange and you would have a single identification period that would begin when you sell those properties.

However, if you’re selling three different properties to three different purchasers at three different times, it could be argued that those are three separate and distinct exchanges. That means you would have three separate linear timelines for your exchange deadlines.

Theoretically you could pour the money from all three into a single replacement property and you want to keep all of your options available.

This can be a very tricky situation so it’s especially important that you work with a qualified intermediary when doing a complex exchange like this.

Forge Ahead with Your 1031 Exchange

Forge ahead with your 1031 exchange of investment real estate today by contacting a qualified intermediary with the experience needed to facilitate your exchange. CPEC1031, LLC has over two decades of experience in the like-kind exchange industry. We have worked with clients on their exchanges of real estate all over the United States. We have the skills and know-how necessary to ensure a successful exchange with 100% tax-deferral. Reach out to our team of professionals today to talk about your next like-kind exchange of investment real estate!

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges of Vacation Homes

Vacation homes have been a hot button issue for the IRS when it comes to 1031 exchanges. They have challenged the exchange of second homes, cabins, ski chalets, and the like. Their position is this: if the taxpayer uses the property primarily for personal use, it doesn’t matter that the taxpayer wanted it to appreciate in value and was hoping it was a good investment. What matters is the taxpayer’s use of the property. In short, you can’t exchange a cabin for another cabin if both properties are used for personal use.

Moore v. Commissioner

The seminal case in this area is Moore v. Commissioner. In 2008 the IRS went out of their way to create a safe harbor because a lot of taxpayers like to own vacation condos that are put into rental pools managed by companies that bring in periodic tenants. But the taxpayer may also want to use their condo for a few weeks a year.

So the IRS decided to look at the properties you sell in a 1031 and analyze the two years prior to sale to determine if it was used too much for personal property. They test each of those years to see if the taxpayer used it more than 14 days a year or more than 10% of the time it was rented. If you stay within the confines of this safe harbor, you can still do a 1031 exchange provided it was in a rental pool and your use didn’t exceed these thresholds.

Exchanging into a Vacation Home

The same analysis also applies if you’re exchanging into a property that is going to be put into a rental pool. On the replacement side, if you’re buying a condo you want to make sure that your personal use does not exceed 14 days a year, or 10% of the time it was rented.

Here’s a tip - don’t be cute with the IRS. If you’re going to go on vacation for a month and a half, rent a different condo than the one you own. Then you can avoid this common trap when it comes to 1031 exchanges of vacation homes.

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

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Property that Doesn’t Qualify for 1031 Exchange Treatment

The first question many taxpayers have when they're considering a 1031 exchange is: "does my property qualify?" Here is a quick breakdown of property that does not qualify for 1031 deferred exchange treatment.

Disqualified 1031 Property

Anything that's not used for investment or business purposes or used in one's trade does not qualify for 1031 treatment because section 1031 is only for that which is used in investment, business, or trade. Certain assets are also excluded specifically such as stocks, bonds, and evidences of indebtedness. Partnership interests are also excluded, although there are some exceptions. If you want to do a 1031 exchange, you need to stay inside of the strike zone for 1031 exchanges. For more information check out: The 1031 Strike Zone - Does My Property Qualify?

Troublesome Property Types

Some of the troublesome issues and types of properties to look out for are:

• § 1031s with lake cabins or second homes that may have been used for personal use.

• § Flip and rehab properties that may have been held primarily for re-sale.

• § Buying sheriff certificates and foreclosed properties subject to long redemption right.

• § Partnership interests, stock in corporations and cooperatives.

Finally, bear in mind that foreign property is not-like kind to US property.

• Start Your 1031 Exchange: If you have questions about what types of property qualifies for 1031 treatment, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Partially Deferring Gain in a 1031 Exchange

1031 exchanges are not a zero-sum game. You can have a partial deferral and a partial recognition of gain if you buy down in value.

An Example of a Partial Exchange

Let’s say that you sold a $500,000 property and your remaining adjusted basis is $200,000. Maybe you bought it for more than $200,000 but because of depreciation deductions that have whittled down your original cost basis, you now only have $200,000 in basis. When you acquire new replacement property, your old basis gets transferred to the new property. The original $200,000 in basis follows you to the new property and you only begin to defer gain to the extent that you buy up in value over and above that transferred basis. Let’s say your replacement property was purchased for $450,000. The first $200,000 of that is a wash due to the basis you carried over from the relinquished property. You begin to defer gains on the next $250,000. But that still leaves you $50,000 short of the relinquished property so you would recognize gains on that amount. It’s a partial victory, despite not deferring 100% of the gains.

If you find yourself short of deferring 100% of the gains, there are options available that can help you reach that 100% threshold. For example, you could construct improvements to the replacement property within your 180 day exchange period to increase the property value as needed.

Give Section 1031 a Try

Are you thinking about selling a piece of investment real estate but are hesitating because of the potential capital gains tax bill? If so, then a 1031 exchange might be a good option for you! Section 1031 allows any US taxpayer to defer their capital gains on the sale of qualifying real estate as long as they put the sales proceeds into a bigger and better replacement property. This benefits the taxpayer in multiple ways: by allowing you to defer your taxes and by keeping your money working for you and compounding in a continued investment property.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved