A 1031 exchange can range from as short as two days to as long as 180 days. In a simultaneous 1031 exchange, two parties exchange properties on the same day. However, finding another party willing to part with a similar property can make this type of exchange challenging.
According to the IRS, the maximum duration for a 1031 exchange is 180 days, starting from the sale of the relinquished property. Within the first 45 days, the investor must identify potential replacement properties. At least one of these properties must be purchased by the end of the 180-day period.
1031 Exchange Timelines and Rules
The rules governing 1031 exchanges can make the process complex. Investors should familiarize themselves with the timeline and specific regulations before starting the exchange.
The 45 Day Rule
The initial phase of a 1031 exchange involves a 45-day identification period. During this time, investors must identify potential replacement properties to the Qualified Intermediary (QI) by midnight on the 45th calendar day following the sale of the relinquished property. Investors can use a deadline calculator to track this 45-day period.
The 180 Day Rule
The final phase of the 1031 exchange timeline is the 180-day closing period. After identifying the replacement properties, the investor has up to 180 calendar days from the sale of the original property to complete the purchase of the replacement property or properties. If the purchase isn’t finalized by this deadline, the 1031 exchange will fail, and the sale proceeds will become taxable. A deadline calculator can help track the end of this 180-day period.