Atlanta Deferred Exchange
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Atlanta Deferred Exchange

Is the exchange period ever shorter than 180 days?

Q: I am getting ready to begin my first exchange.  Are there any situations in which the exchange period can be something other than 180 days? A: Although the vast majority of exchange periods are 180 days long (as per IRS guidelines), shorter variations can occur when the sale of your relinquished property occurs between October 15thand December 31st and also depending on when you file your tax return.  The IRS stipulates that the exchange period ends on the 180th day or the filing date of your tax reporting period----whichever comes first.  The graphic below shows three examples that all start with the same relinquished sale on November 27th (and corresponding exchange period beginning on November 28th). Each exchanger has a normal 4/15 tax filing deadline. Check out the graphic below for some examples.

In example #1, the exchanger files his tax return on 4/15.  This effectively shortens the normal 180-day exchange period by 41 days. (In order to complete an exchange, all replacement property must be closed by 4/15.)

In example #2, the exchanger identifies property, elects to purchase only one replacement property using part of the funds, and then files their return early on 2/15.  This shortens their exchange period by 101 days, but allows them earlier access to their remaining funds.

In example #3, the exchanger identifies property, but needs the full 180 days to close.  By filing an extension with the IRS, she can extend the due date of her tax return until 10/15, allowing her to use the full 180 days (until 5/26) to complete the exchange.

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