1031 identification period, second chance?

4 Replies

When doing a 1031 exchange, I know you have a certain number of days to identify a property (I think maybe 45 or 60). But what happens if you identify one but during due diligence you discover things that cause you not to want to move forward with the purchase. What happens if you are past your “identification” period by this point? Does the clock start over or is there some sort of extension to identify a new property to take its place in the exchange?

Nope, it’s 45 days....period.  This is why it is advisable to have the replacement property under contract ASAP, preferably even before you close on the sale of the original property.....time is not your friend.

Originally posted by @Paul Duncan :
When doing a 1031 exchange, I know you have a certain number of days to identify a property (I think maybe 45 or 60). But what happens if you identify one but during due diligence you discover things that cause you not to want to move forward with the purchase. What happens if you are past your “identification” period by this point? Does the clock start over or is there some sort of extension to identify a new property to take its place in the exchange?

Also if you think you might not meet the 45 days, you can do something called the Reverse Like-kind Exchange. You first buy the property and then sell yours. You need a professional help doing this. 

I have heard of options using installment sales that might be able to rescue the exchange after day-45.  Some QI's are friendlier to this option than others.  It is not as clean, but still allows you to defer tax payments on gains (and recapture).

Sorry @Paul Duncan , 45 only.  Calendar days!  The list is set in stone on day 46.  

So try to contract and even close in the 45 day period like @Wayne Brooks says.  

Use contingent contracts for your sale contingent on finding the new property first.  

Get into contract for your purchases before you close the sale of your old property and then use contingencies on those contracts to let you complete the sale first.  

Or as @Ashish Acharya , back up all the way and have your QI purchase the new property and hold it for you in a reverse exchange until your old property sells.

There's ways to mitigate but the timing is serious and there's no give.