AMENDED - 1031 Exchange Law of Identify on 45 Days

This week news broke on an updated law for 1031 Exchanges.  The common rule for 1031 exchanges has been to identify replacement property within 45 days of recordation date on relinquished property. Then you must close on replacement property must occur on the earlier of 180 days from sale of relinquished property, or the date on which tax returns are due for the calendar year in which the relinquished property is sold.

However, in my entire career as a 1031 Exchange advisor there has probably never been a better time to do a 1031 Exchange.  If you are considering a 1031 - please consider it now.   As I've been telling everyone for the last several weeks, the IRS has issued extensions for the 1031 Exchange timeline.  In some cases, they have completely waived the need to identify on day 45!

Not all taxpayers will qualify, but most people who reside in CA will and if they do, the extensions are as follow:

·         Relinquished Property closed after 11/24/22 and before 4/19/23, no ID is required and you must complete your exchange by 10/16/23.

·         Relinquished Property closed after 4/18/23 and before 9/1/23, you receive an extension on your ID deadline until 10/16/23 and you will have 180 days to complete your exchange.

In other words, if you sell your property after April 19^th and before September 1^st of this year, you will have until October 16,2023 to identify the properties you intend to exchange into.  In essence, the IRS is giving the taxpayer the extension of time that has never been offered before.  Instead of being on a strict timeline of 45 days after the close of escrow, if you closed on the relinquished property in June of 2023, you would have almost 120 days to identify 3 like kind properties or until October 16, 2023, whichever comes first.  Then, on October 16, 2023, you would begin the 180 days to complete the exchange.

If your objective is to exercise your 1031 exchange sometime in the next year, you may not want to wait, so you can take advantage of this once in a lifetime opportunity.

 

As always, any exchange would need to be handled through a qualified intermediary exchange company.  When you plan to exercise this option, we have trusted advisors to facilitate the process.