What Is The Biggest Risk Of A 1031 Exchange?

For many investors, the idea of achieving tax-deferral on capital gains through a 1031 exchange is quite appealing. After all, who wants to pay unnecessary taxes if they could instead save that money and reinvest it now?

However, while 1031 exchanges sound relatively straightforward – you sell one property and buy another to replace it – there are pitfalls for the unwary. In fact, many seemingly straightforward exchanges fail because of one reason – the investor does not adhere to strict IRS guidelines.

There are several non-negotiable deadlines involved with a 1031 exchange. First, you must name like-kind replacement property within 45 days of selling your original property. Second, you must close on the sale of the like-kind replacement property within 180 days of the date you sell your relinquished property.

The IRS doesn’t bend on strictly implementing these rules, either.

This is why it is imperative that an investor understands these deadlines clearly and commits to following through on all the details throughout the duration of the exchange. Missing one of these deadlines by even one day can cause your exchange to totally fail.

To learn more about 1031 exchanges orour qualified intermediary and replacement property locator services, please visit ourwebsite.