Crucial Deadlines in a 1031 Exchange

In this 1031 FAQ video, Jeff Peterson lays out the two most important deadlines you need to abide by in a 1031 exchange. Watch more 1031 educational videos here.

Video Transcript:

There are two extremely important deadlines when you're doing a deferred exchange. The first is the 45-day identification period, which commences the day after the closing of the relinquished property.

So when does the closing of the relinquished property occur? It’s when the benefits and burdens of ownership shift. When that deed crosses over to the buyer and the consideration or sales proceeds come across the table to the seller, that's when the benefits and burdens of ownership shift. That’s day zero for computing a 45-day identification period.

By midnight of the 45th day you need to have sent your identification in writing to the intermediary or to another party to the transaction that's not a disqualified person. Typically people send the identification to the intermediary but in theory you could send it to other people such as the seller of the replacement property unless they're related to you or otherwise disqualified.

The other important deadline is the 180-day exchange period. You only have 180 days to receive your replacement property and again that clock runs concurrently from the day after closing of the relinquished property. There's a big curve ball though with regard to the hundred and eighty day deadline because the IRS is impatient. They don't want to wait until your subsequent tax return to see how this story unfolds. They say we’ll give you a hundred and eighty days to complete your exchange, but if the due date for the filing of your federal income tax return pops up within that hundred and eighty days, they shorten down the exchange period to the due date of the filing of your tax return.

Well if you start your exchange day in December and you have to file your tax return on April 15th you're not going to get your full 180 days. There's an easy fix though - you simply ask for an extension on your federal filing deadline and move your filing deadline out to October 15th. Now that extends the tax filing period but does not lengthen your exchange period. You still only have a maximum of 180 days. During that timeframe you've got to receive the benefits and burdens and ownership of your new replacement property.

  • 1031 Hotline: If you have questions about 1031 timeframes and deadlines, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

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