1031 Exchanges Started Later in the Year

Many taxpayers do not consider if there are any issues that may come up when starting a 1031 Exchange later in the year, but there can be.

For example, if a relinquished property closes in a 1031 Exchange on December 1, 2023, you would assume that you have your standard 45 day identification period to identify replacement property and your standard 180 day exchange period to acquire all replacement properties for said exchange. While the 45 day identification period does not change, there is a change with your 180 day exchange period.

As IRC §1031 reads, the exchange period is the shorter of 180 days or the due date of the taxpayer’s tax return. For the tax year ending 2023, the tax filing date for a standard yearly filer is on Monday, April 15, 2024. If your relinquished property closed on December 15, 2023, you would assume that you have until June 13, 2024 to complete your 1031 Exchange. That is not the case. The expiration of your exchange will occur on April 15, 2024.

To avoid this situation and be able to utilize all 180 days of your 1031 Exchange period, the taxpayer must file for an extension. Many taxpayers will not need to file for an extension as they will complete their exchange by the April 15th date. But, if you require the use of all 180 days for your transaction, an extension will be required. In situations like this, your tax professional will normally work with you in completing Form 4868.

Please consult with your tax advisor to be assured that you are in compliance with the requirements for your specific transaction.