Exchange Timelines

There are no actual holding rules given by the IRS. Many tax advisors advise that the property be held at least 12 months prior to the exchange. The amount of time the property is held is not the only thing the IRS looks at when determining the validity of a 1031 Exchange. Another important factor is the intent to hold the property for business or investment use.

There is no holding period if you want to exchange the property. You can exchange the day after you buy a property. Remember you don’t want to be considered a dealer or speculator so be certain not to have a contract on the record to SELL before you have actually closed on the property you are BUYING..but you can enter a contract to sell right after you buy.

There are no actual holding rules given by the IRS. Many tax advisors advise that the property be held at least 12 months prior to the exchange. The amount of time the property is held is not the only thing the IRS looks at when determining the validity of a 1031 Exchange. Another important factor is the intent to hold the property for business or investment use.

Property(ies) to be acquired must be identified and delivered by midnight of the 45th day following the date of close of the relinquished property. All replacement property(ies) must close escrow by midnight of the 180th day following the date of close of the relinquished property. For the most part, the 45 day and 180 day limits cannot be extended. However, the IRS has issued extensions to areas affected by natural disasters. Your accommodator will have the latest information regarding limit extensions. An example of an extension issued by the IRS is here.

The exchange must be completed by the tax filing date of April 15th unless a taxpayer files for an extension to file federal and state tax returns. Once the extensions of time have been filed, you must complete your 1031 exchange transaction within the 180 days before you actually file your Federal and state income tax returns.

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We know that 1031 exchanges, real estate financing, and everything in between can be confusing, and a 10 minute phone call can help clear things up. So give us a call or schedule a consultation today, and we’ll be happy to talk through your specific needs.