1031 Exchange Time Periods
The 45-Day Identification Period begins with the closing of the relinquished property and requires the identification of like-kind replacement property. The identification must be made in writing and signed by all Exchangers. A written identification signed by your agent, such as your attorney, accountant or real estate professional, instead of you will be an invalid identification.
- At any time during this 45-Day Identification Period, a written identification may be revoked and a new one made.
- If a like-kind replacement property has not been properly identified by midnight of the 45th day, the exchange will fail and you will be unable to defer the capital gains. On the 46th day (or the next business day), all funds from the deposit account will be paid to you. This includes interest earnings.
Tip: To maximize the 45-Day Identification Period, take advantage of the time you have before the 45-Day Identification Period starts. Begin looking for desirable replacement property before you have your relinquished property sold. You can sign an Agreement of Sale for the replacement property before conveying title of the relinquished property to a buyer. You can request to be reimbursed from the exchange proceeds any out-of-pocket earnest money deposits made on the replacement property. The reimbursement is made at the time of acquisition of the replacement property. The dates the Agreements of Sale are signed do not matter; the time deadlines are based on the actual conveyance dates.
The 180-Day Exchange Period* runs concurrently with the 45-Day Identification Period and requires the acquisition of all desired identified replacement properties. Signing an Agreement of Sale is not sufficient. The Taxpayer must actually take legal and equitable ownership of the replacement property on or before the 180th day.
* If the settlement of the relinquished property occurs between October 18 and December 31 of the current year, for individual taxpayers, the 180-Day Exchange Period will be shortened to the due date of the federal income tax return of the next calendar year unless a timely and proper IRS extension is filed for their return.
Anyone with a 45-Day Identification Period or 180-Day Exchange Period deadline between April 1 and July 15, 2020 will have an automatic extension to July 15th. Notice 2020-23 allows this extension for taxpayers currently engaged in a 1031 exchange and struggling to complete their transaction due to the Coronavirus (COVID-19) crisis. Read More