Learn about 1031 exchanges, timelines and the process
1031 Exchange Timeline and Process
The safe-harbor exchanges allow for a total of 180 days. Day 1 begins when the taxpayer sells their relinquished property and Land 1031, the qualified intermediary, receives the sale proceeds. Within the first 45 days, the taxpayer must identify and designate their replacement property formally. This identification must be submitted by midnight of the 45th day, meeting additional requirements. From day 46 onward, the taxpayer has 135 days remaining to close on the replacement property. They can close at any time before the 180-day deadline. When the replacement property closes, Land 1031, the qualified intermediary, will distribute the proceeds from the relinquished property to the closing coordinator for the purchase of the replacement property.
Types of 1031 Exchanges
Key Rules
- Exchanged property must be like-kind real estate, nearly all real estate is like-kind to other real estate.
- Property cannot be a primary residence or a vacation home.
- The same taxpayer who sells must also purchase.
- The buyer of the relinquished property and the seller of the replacement property must declare their intentions to complete a 1031 exchange.
- If the exchanger’s tax return is due prior to the 180th day, the exchange period may be shorter than 180 days. If so, an extension on filing the tax return would be necessary.
- The price of the replacement property must be equal to or greater than the sales price of the relinquished property to avoid taxable gains. Any amount or debt not reinvested is considered “Boot” and is subject to taxation.
- The relinquished and replacement properties must demonstrate intent for investment or business use.
- If the seller of the replacement property is related to you by familial or business association, their eligibility as a seller requires special attention to potentially qualify.
