The 1031 Exchange Timeline

The 1031 Exchange Timeline

The 45 Day Deadline Replacement properties must be identified within 45 days from the date of sale of your initial property. The identification must be in writing, signed by you, and delivered to a person involved in the exchange. Replacement properties must be clearly described, including legal description, and street address or distinguishable name.

The 180 Day Deadline: A replacement property must be received and the exchange completed no later than 180 days after the sale of the initial property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.

Upon the sale of their existing property, the investor has 45 days from the sale date to identify the new property they want to buy in the exchange, and make an offer. Here is a sample guideline on how the exchange could work:

  1. The investor sells their current property.
  2. The funds from that sale are transferred to a qualified intermediary to hold while the investor finds their next investment property.
  3. Upon the sale of the property, the investor has 45 days from the sale date to identify the new property they want to buy in the exchange, AND submit an offer.
  4. The intermediary will then transfer all the funds to execute the purchase once the offer is accepted.
  5. You then have 180 days to finalize and close the exchange from the sale of the initial property.

Other Considerations When Choosing a 1031 Exchange

Focus on YOUR requirements

Acquisition criteria and needs vary from one client to the next. We look at your unique situation to identify what you need in your exchange property and pre-qualify the available properties on the market to expedite the process.

Find A Reputable and Experienced 1031 Exchange Intermediary

Under section 1031, any proceeds received from the sale of a property remain taxable. For that reason, proceeds from the sale must be transferred to a qualified intermediary, rather than the seller of the property, and the qualified intermediary transfers them to the seller of the replacement property or properties. This a person or company that agrees to facilitate the 1031 exchange by holding the funds involved in the transaction until they can be transferred to the seller of the replacement property. The qualified intermediary can have no other formal relationship with the parties exchanging property.

What Exactly is Like-Kind Property

Like-kind property is defined according to its nature or characteristics, not its quality or grade. This means that there is a broad range of exchangeable real properties. Vacant land can be exchanged for a commercial building, for example, or industrial property can be exchanged for residential. But you can’t exchange real estate for artwork, for example, since that does not meet the definition of like-kind. The property must be held for investment though, not resale or personal use. This usually implies a minimum of two years’ ownership.

Are you ready to make the exchange? Contact Us

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Amanda WillisThe 1031 Exchange Timeline