1031 exchanges are governed by strict time frames. But sometimes taxpayers may miss a deadline, bringing the entire exchange into question. In this article, we are going to talk about what happens if you fail to properly identify your replacement property before the 45th day of your identification period.
First, it’s important to remember that you only have a set amount of time to complete your 1031 exchange. Once you begin the exchange process by selling your relinquished property, you only have 180 days to complete your exchange. The first 45 of those days are your identification period in which you must identify in writing the replacement properties that you intend to exchange into. So what happens if you don’t give written identification of a property within this period?
Failure to Identify
Unfortunately, the IRS is very strict about the timelines set out in section 1031. If you fail to identify replacement property within your 45 day identification period, your exchange will fail and you will be subject to capital gains taxes on the sale of your relinquished property. There’s really no salvaging the exchange at this point, so it’s essential to work ahead to avoid this potential pitfall.
Get Your Exchange Started
It’s never too early to get started on your 1031 exchange of real estate. The earlier you begin preparing for your exchange, the great chance of success. The qualified intermediaries at Commercial Partners Exchange Company have two decades of experience facilitating 1031 exchanges of all shapes and sizes. Our team can answer all of your questions, advise you on properties, and prepare your like-kind exchange documents. Give our intermediaries a call today to learn more about how we can help you with your 1031 exchange of real estate.