One of the most common questions regarding 1031 exchanges is - what happens if you change your mind after starting the process? If you’ve already begun the 1031 exchange process, do you need to go through with it?
Options After Starting the Exchange
The short answer is no. By setting up the 1031 exchange with the qualified intermediary you are keeping your options open to potentially completing an exchange (and deferring the gains), but you are not obligated to buy any replacement properties. After the closing of the relinquished property, you will have 45 days to designate or identify in writing the potential replacement properties, and if you do not designate any properties, then the 1031 exchange will fail, and the unused exchange funds will be returned to you on the next business day.
If you do designate some potential properties, then you will continue to keep the your options open to potentially completing an exchange as to those designated properties that you listed for the remainder of the exchange period (180 days). Any remaining unused exchange funds will be returned to you on the next business day after the 180th day has elapsed.
Both the 45-day identification period and the 180-day exchange period run from that day after closing of the relinquished property.
For more information, please check out this educational video on the 1031 Identification rules.
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.
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