Section 1031 has been called the last great weath building tool left in the Internal Revenue Code. While the rules to complete a qualifying exchange are modest, it is critical that you understand and incorporate the rules into your transaction to ensure your 1031 is compliant.
Every exchange should be planned beforehand. This provides an opportunity to anticipate all the transfers and mitigate any potential logistical issues before they have an opportunity to surprise you.
The IRS requires that you identify candidate replacement property within 45 days after your relinquished property closing. You'll also need to use one of three IRS identification rules to identify replacement properties.
Make sure you close on all your replacement property within 180 days of the closing of your relinquished property. If you start late in the year you may have to file an extension to secure all 180 days before your return is due.
To complete a qualifying 1031 exchange you must understand the IRS rules associated with transactional timing, the need to include like kind properties only, and successfully identifying your potential replacement properties within 45 days after the closing of your sale property.
