Let’s talk about the timeline for a typical 1031 exchange. For simplicity, we have broken the timeline down into a handful of stages.
Sale of Your Relinquished Property
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.
45 Day Identification Period
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.
- 1031 Hotline: If you have questions about the 1031 exchange timeline, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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