Exchangers have two important deadlines to meet in order to comply with IRC Section 1031 exchange requirements:
- A 45-day deadline to identify potential replacement properties
- A 180-day deadline to acquire the replacement properties and complete the exchange
The deadline periods include weekends and holidays, so careful planning and scheduling of intermittent steps and transaction tasks is important.
45-day Identification Deadline
Once the relinquished property sale is completed in a Section 1031 exchange, the exchanger has 45 days in which to identify potential replacement properties, with their legal descriptions, street addresses or distinguishable names.
Identification Rules
Exchangers may use any one of these three options for identifying replacement property:
Three-Property Rule
Exchanger identifies three properties without regard to their fair market value.
200 Percent Rule
Exchanger identifies any number of properties provided their aggregate fair market value does not exceed 200% of the aggregate fair market value of the relinquished property.
95 Percent Rule
Exchanger identifies any number of properties without regard to fair market value, as long as the properties acquired amount to at least 95 percent of the fair market value of all the identified properties.
Failure to meet the requirements of the identification regulations of IRC 1031 may result in the disqualification of an exchange.
> Form for Identifying Replacement Properties (PDF)
180-Day Transaction Deadline
Each 1031 exchange must be completed within a 180-day period from the date of relinquishing the initial property or the due date of the exchanger's tax return with any extensions included, whichever occurs first. Completing an exchange means transfer of ownership of identified replacement property has been completed.