Understanding the 1031 exchange timeline is critical. If you make even a tiny slip on the dates and your steps, you could lose the potential tax benefits associated with the sale and face a big bill from the IRS.
Here’s your 1031 exchange timeline at a glance:
Deadline | What Must Be Done? |
45 days | You must identify (in writing) potential replacement properties. |
180 days | The replacement property must be received and the exchange completed. |
The tax year | You must file a document with the IRS in the tax year when the exchange occurred. |
The clock for these deadlines starts ticking on the day you sell your relinquished property.
Deadline 1: 45 Days
After you sell your relinquished property, you have 45 days to identify replacements. This is a formal process, and it comes with plenty of documentation requirements. Skip any of these criteria, and you could miss out on valuable tax benefits.
Your identification must meet the following requirements:
It must be in writing.
You must sign it.
You must deliver the document to the person or entity involved in the exchange (like the qualified intermediary you chose).
IRS rules specify that you can identify as many as three alternate properties of any value. However, you must provide the proper documentation for every property you’ve chosen.
Deadline 2: 180 Days
After you sell your relinquished property, you have 180 days to complete the sale and the exchange process. This replacement property must be substantially the same as the one you identified at the 45-day point.
This deadline can be hard to meet. Real estate transactions can be tricky and complicated. Sometimes, sellers use tactics to hang onto their properties for just a little longer while they find a new place to purchase. Careful planning can ensure you meet this deadline.
Remember that you have to complete the sale by this deadline. Keep a tight focus and ensure that nothing slips. The 180-day deadline is calendar days, not business days.
Deadline 3: The Tax Year
To ensure that you get all of the benefits you’re entitled to, you must report the completed transaction to the IRS with Form 8824. You must submit this document at tax time for the year in which the exchange occurred.
This deadline is easy to forget, and many people do so. For example, if you finish the process in January, it could seem like a distant memory in April of the following year. Ensure that you don’t let this deadline pass you by.
Can You Extend These Time Frames?
No one likes tight deadlines, and many of us work hard to push them and get more time to do the things we want. However, these time frames can’t be shifted.
The IRS says these limits can’t be extended unless the President of the United States declares a disaster. Since that rarely happens, it’s best to ensure you don’t miss any dates.
Get Help With 1031 Exchange Timelines
As a busy real estate professional, you don’t have time to handle all of the nuts and bolts of complex transactions. Unfortunately, if you miss even a small detail, you could face big consequences.
Let the qualified team at 1031 Pros help. We specialize in 1031 exchanges—this is all we do. We are fully bonded and insured and a member of the FEA. We can help you with these transactions and ensure you hit every deadline perfectly. Contact us to get started.
References
Like-Kind Exchanges Under IRC Section 1031. (February 2008). Internal Revenue Service.
Exchanges Under Code Section 1031. American Bar Association.
Like-Kind Exchanges - Real Estate Tax Tips. Internal Revenue Service.
2023 Instructions for Form 8824. Department of the Treasury, Internal Revenue Service.
Part III: Administrative, Procedural, and Miscellaneous. Internal Revenue Service.
Like-Kind Exchanges of Real Property. (January 2022). Journal of Accountancy.
Like-Kind Exchange Deadlines That Fall on Weekends and Holidays. (October 2023). Tax Notes Federal, Vol. 181. Brooklyn Law School, Legal Studies Paper No. 759.
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