What Are the Time Limits for a 1031 Tax-Deferred Exchange?

Top 50 Questions about Farmland

A 1031 Tax-Deferred Exchange allows you to defer taxes on capital gains by reinvesting the proceeds from a property sale into a like-kind property. However, strict timelines apply.

Key Time Limits

1. Closing Date (Sale Date):

   • The sale date for a 1031 exchange is the closing date—when funds officially change hands, not when the auctioneer says “sold.”

2. 45-Day Identification Period:

   • You have 45 days from the closing date to identify potential replacement properties.
   • This must be done according to IRS rules, such as the 3-property rule (identify up to three properties) or the 200% rule (identify properties worth up to 200% of the sold property's value).

3. 180-Day Closing Period:

   • You have 180 days from the closing date to complete the purchase of the replacement property and transfer funds.

How the Process Works

• Qualified Intermediary: During the exchange, sale proceeds are held by a qualified intermediary in a separate trust account specific to your transaction.
• Funds cannot be accessed by the seller during this period—they must go directly toward the purchase of the replacement property.

Key Takeaways

1. The 45-day period starts on the closing date, not the auction date, to identify replacement properties.
2. The 180-day period is the total time to close on the new property after selling the old one.
3. Funds are managed by a qualified intermediary throughout the process.

Need assistance navigating your 1031 exchange? Contact David Whitaker – Iowa Land Guy for expert guidance and support! David Whitaker | Iowa Land Guy