Timelines are very important in any 1031 exchange of real estate. You want to always be cognizant of your deadlines so you don’t accidentally miss any and jeopardize your exchange. In this article, we are going to talk about overlapping timelines with forward and reverse 1031 exchanges.
Forward 1031 Exchange
When you’re doing a forward 1031 exchange that means you’ve sold the relinquished property first. The day of the closing of the relinquished property is day zero. You have 45 days thereafter to make your identification. At midnight of the 45th day the exchange will fail if there has been no identification made. According to the regulations, your replacement property identification must be sent by midnight of the 45th day.
Reverse 1031 Exchange
If you’re doing a reverse exchange, then you’re not identifying the replacement properties. Rather, you’re identifying the relinquished properties you’re going to be disposing of in the exchange.
Overlapping Timelines
There can be a situation in which you do a reverse exchange, followed by a forward exchange. In that scenario, you may park one property (let’s say a $200,000 piece of land that was previously purchased). Then you sell your relinquished property for $500,000, so you get the proceeds from that $500,000 sale. The qualified intermediary then immediately transfers the initial replacement property to the exchachor. Concurrently, the taxpayer has a forward exchange going and they can identify additional replacement properties within the 45 day identification period and receive them within the 180 day exchange period. So you can, as in this scenario, have two overlapping linear timelines.
Start Your 1031 Exchange
Considering a 1031 exchange? Contact a qualified intermediary to work through the details of your transaction. Our intermediaries have over two decades worth of experience facilitating exchanges of all shapes and sizes. Contact our qualified intermediaries today at our office in Minneapolis to get your 1031 exchange off the ground!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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