Although tax deferred exchanges under Section 1031 have become quite common, most people outside of the exchange industry are not familiar with the legal requirements surrounding a successful tax deferred exchange. A 1031 exchange can benefit you if you are a real estate investor, but it is important to know the rules surrounding it. Certain strict timelines apply in every 1031 exchange, including: (i) a 45 day “identification period” and (ii) a 180 day exchange period. Each of the foregoing time periods commences on the sale or transfer of relinquished property. Starting then, the taxpayer must deliver a written identification letter to a qualified intermediary or other party to the transaction that describes the property sought to be acquired as replacement property in the exchange. The taxpayer must actually receive the replacement property identified in the exchange no later than the earlier of the 180th calendar day following the transfer of the relinquished property or the due date for the exchanger’s tax return, including extensions. There is a lot more nuance to the rules, but if you want to learn more, click on What Not to Do In a 1031 Exchange.
Don Leadroot, Esq.NW RepresentativeDirect: 503-819-2663don@apiexchange.com2020 SW Fourth Ave., Suite 190Portland, OR 97201