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Atlanta Deferred Exchange

What are the timelines I must meet on a 1031 exchange?

Q: I am considering doing a 1031 exchange, but need to understand more about the timelines that are inherent in the process.  What are they and how long do I have to meet them?

A:  Tax deferred exchange transactions must be executed in a proper order. You must sell what you have, before you can buy what you want. The sale of the relinquished property (the property being sold) initiates both the identification period and the acquisition timelines for these transactions. Both timeframes have the same beginning date which is the day after the relinquished property was sold (title transferred to the new buyer.)

 

The first is a 45-day period of time to identify potential replacement property.  Once your relinquished property has closed, you have until midnight on the 45th day to identify replacement property. Generally this requirement is fulfilled by sending a letter to your Qualified Intermediary (QI) listing the potential replacement properties that you are identifying. There are specific ID rules as to how many properties can be identified and how to identify them. Once the 45 days have past, you cannot substitute properties and are limited to acquiring the properties already listed in your identification letter.

The second timeline also begins the day after you sell the relinquished property.  You have 180 days or until the filing date of your tax return (more about that in our blog post), whichever comes first, to acquire your replacement property. There are no standard extensions for this time requirement. If, during the exchange period, a presidentially declared natural disaster is declared that directly impacts your exchange, it may be possible to get time extensions. If the timing of the contemplated transaction is not in the proper order, it may be wise to consider the benefits of executing a reverse exchange strategy.