1031 Exchange Deadlines: 45 Days and 180 Days

A successful 1031 exchange transaction requires Investors to comply with certain deadlines pursuant to Section 1031 of the Internal Revenue Code, which have been further clarified within Section 1.1031 of the Department of the Treasury Regulations.

The tax-deferred exchange deadlines consist of the 45 calendar day identification period and the 180 calendar day (or less) exchange period. These deadlines can not be extended under any circumstances, unless the President of the United States declares a natural disaster area that affects the properties or parties involved with the tax-deferred like-kind exchange transaction.

45 Calendar Day Identification Deadline

Investors completing a 1031 exchange must identify their potential replacement property(ies) to their Qualified Intermediary (Accommodator) no later than midnight of the 45th calendar day following the close of the relinquished property sale transaction. For example, if the sale of the Investor's relinquished property closed on October 31 the first day of the 45 calendar day identification period would be November 1 and the 45th calendar day deadline would be December 15th.

This deadline is exactly 45 calendar days, so if the 45th calendar day lands on a Saturday, Sunday or legal holiday, the deadline is NOT extended to the next business day as it is in other parts of the income tax code and regulations.

Investors should plan ahead once they have decided to complete a 1031 exchange transaction. The 45 calendar day identification period will arrive very quickly. Investors may wish to approach and negotiate with the buyer of their relinquished property for an extention of time to close the transaction in order to provide more time to locate and identify suitable like-kind replacement properties.

The identification should be made formally in writing to the Qualified Intermediary by facsimile, United States Mail or overnight courer such as FedEx, UPS or DHL.

Exeter 1031 Exchange Services, LLC maintains a bank of facsimile machines so that clients can submit their like-kind replacement property identification forms 24 hours a day, 365 days a year, via facsimile. Refer to our web page on Identification Requirements for Like-Kind Replacement Properties for more complete information on the identifcation process.

Investors can change their mind by formally revoking their identification of their like-kind replacement properties and subsequently submit a new identification form at anytime during their 45 calendar day identification period, but may not change their mind after this time frame has passed. Revoking and submitting a new identification form does not change or reset the original 45 calendar day identification deadline.

The act of altering, changing, amending, or back-dating a replacement property identification form in order to save a 1031 exchange transaction is classifeid as Federal tax fraud, and you should avoid any Qualified Intermediary that engages in, or permits or suggests any such practice.

Failure to identify like-kind replacement property(ies) within the 45 calendar day window will result in a failed tax-deferred like-kind exchange transaction, and the subject transaction must be recharacterized as a taxable sale rather than a tax-deferred like-kind exchange.

180 Calendar Day Exchange Period

Investors must complete their 1031 exchange, which includes the receipt of title to all of their like-kind replacement properties, no later than the earlier of:

(1) midnight of the 180th calendar day following the close of the relinquished property sale transaction, or

(2) the due date of the Federal income tax return for the tax year in which the relinquished property was sold, including any extensions of time to file.

You do not need to be concerned about part two above unless the first relinquished property transaction sold and closed within the 1031 exchange transaction closed on or after October 17th and on or before December 31st of any given tax year, which would mean that the 180th calendar day would land after April 15.

Investors that have tax-deferred exchanges closing on or after October 17th and on or before December 31th of any given income tax year will have fewer than 180 calendar days to complete their tax-deferred like-kind exchange transaction, unless they file for an extension of time to file their federal and, as necessary, state income tax returns.

Once the extensions of time have been filed, Investors must complete their tax-deferred like-kind exchange transaction within the 180 calendar days before they actually file their Federal and, if applicable, state income tax returns. Investors will never have more than 180 calendar days to complete their tax-deferred like-kind exchange transaction.