What’s the Reason for Federally Mandated Timelines and Deadlines for a 1031 Exchange?
August 29, 2016
In order to properly execute a 1031 exchange, certain federally mandated steps must be completed.
The first time period in a 1031 exchange is known as the Identification Period. Beginning on the day the exchanger closes on the relinquished property, a 45-day clock begins to tick. The exchanger will have 45 days to identify potential replacement property. So the day the investment property is sold, the clock starts ticking.
Concurrently, the deadline that also begins on closing day is the Exchange Period. The exchanger will have a total of 180-days from closing on the relinquished property to acquire the replacement property. Since the first 45-days of the Exchange Period run concurrently with the Identification Period, the exchanger will only have 135-days from the end of their Identification Period to complete the exchange. Therefore, the purchase of the exchange property must happen by the 180th day.
It is important to note that the Federal Government allows for no extensions for weekend and holidays, so the Exchange Period is 180 calendar days. If day 180 is on Christmas, then expect in most cases to have replacement property closed before the holiday. The same is true with the Identification Period.