1031 Exchange Deadlines and Due Dates
The successful completion of a tax-deferred like-kind exchange transaction requires Investors to comply with certain deadlines pursuant to Section 1031 of the Internal Revenue Code, which have been further clarified within Section 1.1031 of the Department of the Treasury Regulations.
The 1031 exchange deadlines consist of the 45 calendar day identification deadline and the 180 calendar day (or less) exchange period. These deadlines can not be extended under any circumstances, unless the President of the United States declares a natural disaster area that affects the properties or parties involved with the tax-deferred like-kind exchange transaction.
Investors completing a tax-deferred like-kind exchange transaction must identify their potential like-kind replacement property(ies) to their Qualified Intermediary (Exeter 1031 Exchange Services, LLC) no later than midnight of the 45th calendar day following the close of the relinquished property sale transaction. For example, if the sale of the Investor's relinquished property closed on October 31 the first day of the 45 calendar day identification period would be November 1 and the 45th calendar day deadline would be December 15th.
This deadline is exactly 45 calendar days, so if the 45th calendar day lands on a Saturday, Sunday or legal holiday, the deadline is NOT extended to the next business day as it is in other parts of the income tax code and regulations.
Investors should plan ahead once they have decided to complete a tax-deferred like-kind exchange transaction. The 45 calendar day identification deadline will arrive very quickly. Investors may wish to approach and negotiate with the buyer of their relinquished property for an extention of time to close the transaction in order to provide more time to locate and identify suitable like-kind replacement properties.
The formal identification should be made in writing to the Qualified Intermediary (Accommodator) via facsimile, U.S. Mail or overnight courer. Exeter 1031 Exchange Services, LLC maintains a bank of facsimile machines so that clients can submit their like-kind replacement property identification forms 24 hours a day, 365 days a year, via facsimile. Refer to our web page on Identification Requirements for Like-Kind Replacement Properties for more complete information on the identifcation process.
Investors can change their mind by formally revoking their identification of their like-kind replacement properties and subsequently submit a new identification form at anytime during their 45 calendar day identification period, but may not change their mind after this time frame has passed. Revoking and submitting a new identification form does not change or reset the original 45 calendar day identification deadline.
The act of altering, changing, amending, swapping or back-dating a like-kind replacement property identification form in order to save a tax-deferred like-kind exchange transaction is classifeid as income tax fraud, and Investors should avoid any Qualified Intermediary that engages, permits or suggests any such practice.
Failure to identify like-kind replacement property(ies) within the 45 calendar day window will result in a failed tax-deferred like-kind exchange transaction, and the subject transaction must be recharacterized as a taxable sale rather than a tax-deferred like-kind exchange.
Investors must complete their tax-deferred like-kind exchange transaction, which includes the receipt of title to all of their like-kind replacement properties, no later than the earlier of:
(1) midnight of the 180th calendar day following the close of the relinquished property sale transaction, or
(2) the due date of the Investor's Federal income tax return for the tax year in which the relinquished property was sold, including any extensions of time to file.
Investors do not need to be concerned about part (2) above unless the first relinquished property transaction sold and closed within the tax-deferred like-kind exchange transaction closed on or after October 17th and on or before December 31st of any given tax year, which would mean that the 180th calendar day would fall after April 15.
Investors that have tax-deferred like-kind exchange transactions closing on or after October 17th and on or before December 31th of any given income tax year will have fewer than 180 calendar days to complete their tax-deferred like-kind exchange transaction, unless they file for an extension of time to file their federal and, as necessary, state income tax returns. Once the extensions of time have been filed, Investors must complete their tax-deferred like-kind exchange transaction within the 180 calendar days before they actually file their Federal and, if applicable, state income tax returns. Investors will never have more than 180 calendar days to complete their tax-deferred like-kind exchange transaction.
Exeter 1031 Exchange Services, LLC is always available to assist its clients in navigating through the required tax-deferred like-kind exchange deadlines.
Clients and their professional advisors are welcome to contact any of our 1031 Exchange Specialists at one of our national branch office locations for assistance.