1031 TAX DEFERRED EXCHANGE & DELAYED EXCHANGES

Most Exchanges today are delayed or deferred exchanges. 

The essence of a delayed Exchange is that the sale of the old property and the transfer of the new property to the Taxpayer take place at different times.

In the typical delayed exchange, the taxpayer transfers the property to be sold to a "Qualified Intermediary" and the Qualified Intermediary sells the property to the buyer. In a separate and subsequent transaction, the Qualified Intermediary acquires the new property from the seller and conveys the new property to the taxpayer.

However, specific provisions in IRC §1031 limit the amount of time that is allowed to lapse between the sale of the old property and the subsequent transfer of the new property to the Taxpayer.

The Taxpayer has 45 days from the date of sale of the old property to identify the property he/she wants as the replacement property in the Exchange.

The transfer of the replacement property to the taxpayer must occur:

• on or before 180 days from the date of sale of the old property OR
• before the time for filing the tax return for the tax year of the sale date of the old property, whichever occurs first. If the filing date of the taxpayer’s return occurs before the receipt of all replacement property, then the taxpayer must file a request for automatic extension so that the replacement property is acqired prior to the filing of the tax return.

The experts at Exchange Authority can help you avoid the mistakes so that your exchange does not fail.  Contact us to assist you with your next exchange.