Timeframes

Do I Have Time to Do a 1031 Exchange?

Time for 1031 Exchange

Many taxpayers who want to do a 1031 exchange wonder if they have enough time or if it’s too late. In this article, we will talk a little bit about the various time constraints of a 1031 exchange so you can determine whether or not you have the time to conduct a 1031 exchange.

Calculating Your Timeline

In a typical 1031 exchange you have 180 days total from the start of your exchange to completion. The first 45 of those days are your identification period. There are some rare exceptions to these rules, but for the vast majority of exchanges you need to stick to these timeframes.

Calculate your 1031 exchange deadlines with our online calculator.

Last Minute Deals

Generally, the earlier you begin the 1031 exchange process the better. If you wait until the last minute to set up the exchange, you may not have enough time. If you are even considering a 1031 exchange, contact a qualified intermediary to discuss your options.

1031 Tax Deferral

If you are looking to sell investment real estate, why not avoid a hefty capital gains tax bill by conducting a 1031 exchange of the property? Like-kind exchanges are a legitimate way of deferring your taxes on the sale of real property and making your money work for you in a future investment. At Commercial Partners Exchange Company, our qualified intermediaries have two decades of experience working with taxpayers all over the country on their 1031 exchanges of real property. Contact our team today at our downtown Minneapolis office to discuss the details of your exchange and how we can help you save money!

  • 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.

 

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

180 Day Exchange Period - Can it Be Extended?

180 Day Exchange Period

Many people want to know if the 1031 exchange 180 day period is a hard-and-fast deadline or if there's flexibility to prolong the exchange period.

As a General Rule

The general rule is no, you can't go beyond the 180th day. It is a hard and fast rule. That being said, many people have been affected by hurricanes and other federally declared disasters that are eligible for extensions under rev proc 2007 – 50.

Federal Disaster Areas

However, in some situations the executive branch will issue a notice that a certain geographic area has been declared a federal disaster area and folks that are in that area may be eligible for extensions (typically of 120 days from the date of the disaster).

Other taxpayers who are not in that geographic area but are doing business transactions within the disaster area may also be eligible for extensions, but the notices typically require the taxpayers to contact the IRS and to explain why they are directly and adversely affected by the disaster. Maybe their title company was flooded out, for example.

So you need to follow the notice issued by the executive branch and the requirements of rev proc 2007. If you do that you may be eligible for an extension but there are limits on how far that extension can go out. You should always work with a competent CPA to make sure you're eligible for the extension and understand how long that extension is in relation to your exchange.

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

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

Deadlines & Implications of a Failed 1031 Exchange

1031 identification by mail

In a 1031 exchange there are some pretty brutal and harsh deadlines that you have to meet in order to have a successful exchange. Here are some tips for meeting those deadlines.

Identify by Day 45

You have to identify your replacement property by midnight of the 45th day. If you miss that deadline you are SOL (Statutorily Out of Luck) because the statute says you have to have sent your identification in before midnight of the 45th day.

Fax, Email, Snail Mail

Sometimes taxpayers doing exchanges will fax, e-mail, or FedEx identification to their intermediary so that they have some recorded documentation that it was sent within the proper time frame. If you go to the mailbox and drop your identification in a stamped addressed envelope to the intermediary on the last day of the exchange you may have sent it but you may not have any proof that it was sent, especially if the postal employee doesn't pick up the mail from the mailbox and the letter isn't actually postmarked until a day or two later when it is processed at the mail sorting service.

To be on the safe side, send the identification by fax and email, and if you want to you can also mail it and try to get the letter postmarked by going directly into a postal office and handing the letter to the postal employee before midnight of the 45th day.

  • 1031 Hotline: If you have questions about the deadlines and implications of a failed 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

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.

 

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved

What Happens When a Taxpayer Does not Identify Property Within 45 Days?

taxpayer identification

What happens if we do a 1031 exchange and the taxpayer does not identify replacement property within the 45 days?

1031 Identification Periods

If the taxpayer actually closes on their property within the first 45 days, they don't have to identify. They are deemed to have identified because they closed on and receive their property during the 45 days. If, however, they want to keep hope alive after the 45th day, the only way to do that is to designate in writing replacement properties that may be received by the taxpayer within the remaining exchange period.

Failing to Identify

If you fail to identify or you revoke your identification in writing during the 45 day period, then the exchange ends at midnight of the 45th day and no other replacement properties may be received because there have been none identified. At this point you are now looking at having conducted a taxable sale (or partly taxable sale) and you'll receive back your unused exchange funds. However, you may have to give away a lot of your hard-earned equity in state and federal taxes.

Practice Tip:  You should always use the time before the relinquished property closing and the 45 days thereafter to vigorously search for like-kind properties that you can designate for your 1031 exchange; or lock-down a replacement property with a reverse exchange to increase your success rate in deferring the capital gains taxes.

  • 1031 Hotline: If you have questions about property identification periods in a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved