What You Need To Know To Successfully Complete Your 1031 Property Exchange “Deadlines and Requirements For A Delayed Exchange”

A 1031 property exchange is a way for you to defer capital gains tax on the sale of your property. There are 5 types of 1031 property exchanges. The most common and popular kind is called the delayed exchange.

In the Delayed Exchange there are two deadlines that must be met for the 1031 property exchange to be successful.

1031 Exchange Period – The 1031 Replacement Property must be received before the earlier of the 2 scenarios below….
1. 180 days after the date the Relinquished property was transferred or
2. The due date (including extensions) for the Exchanger’s tax return for the tax year in which the transfer of the first Relinquished Property takes place.
Identification Period – Within 45 days of the transfer of the Relinquished 1031 Property, the exchanger must identify the new 1031 replacement property to be purchased.

In a 1031 Property exchange , the time periods for the 45-day Identification Period and the 180-day Exchange Period are very stringent and can not be lengthened. The deadlines must be met even if the 45^th day is Saturday (or Sunday or any other legal holiday) or the 180^th day is Thanksgiving (or Saturday, Sunday or any other legal holiday).

Either by completing the purchase of the 1031 replacement property during the Identification Period or composing and delivering an Identification Notice by the 45^th day is how to identify a 1031 property for your exchange. The Identification Notice should…

include your signature
include the identity (a legal description, a street address or a distinguishable name) of the 1031 property or properties that you wish to purchase and
be delivered by the midnight of the 45^th day.

If you are planning on improving the property, a description of the land and the proposed construction should be included.

The notice should be delivered to…

the person who is obligated to transfer the 1031 replacement property to you, even if this person is a disqualified agent or
any person involved in the exchange other than the exchanger or a disqualified party (ie. the escrow agent).

You may also revoke your decision by sending another signed letter to the same person the Identification Notice was sent.

If you would like to purchase or identify more than one property for your 1031 property exchange the following guidelines must be met:

The Three Property Rule – You may identify up to 3 properties as potential 1031 Replacement Properties, regardless of their fair market value.
200% Rule – You may identify any number of properties to replace what was sold as long as the aggregate value of these properties does not exceed 200% of the fair market value of the Relinquished properties on the date of the transfer.
95% Exception – You may identify as many properties as you wish for possible replacements for your relinquished property as long as you end up purchasing at lease 95% of the aggregate valued of all the properties you identified.

If you are facing a 1031 property exchange and would like a 1031 specialist to help you identify suitable properties to meet your personal requirements, please contact us today. We are equipped to answer any 1031 exchange question you might have.

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1 Response to “1031 Property Exchange Advisors | Tips, Articles & 1031 Property”

Homepage New | Westwood January 17th, 2009 at 5:19 pm

[...] code (statute) with very precise requirements. Be extremely careful not to inadvertently void your 1031 Property Exchange! Learn the critical deadlines & requirements for a 1031 [...]

What You Need To Know To Successfully Complete Your 1031 Property Exchange “Deadlines and Requirements For A Delayed Exchange”

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