One of the most crucial deadlines to grasp in a 1031 exchange is the 45 day identification period. When you sell your original investment property, you generally have 45 calendar days to identify the property or properties you want to buy as your replacement property.
The 45-day period starts on the day after the sale of your relinquished property. Within this time period you are required to select the property you wish to move forward with and provide written identification to your Qualified Intermediary. The identification must satisfy IRS specifications, so it’s vital to be sure to do it right.
You can identify more than one possible replacement property, but the rules for 1031 exchanges do limit the number of properties that you can identify. This allows for some flexibility if a property doesn’t work out, but you still have to stay within the identification rules.
One thing to remember is that the 45-day deadline is strict. If you do not properly identify a replacement property by the end of the 45-day period, you may not be able to complete the 1031 exchange as intended. There generally isn’t an extension simply because you were unable to find the right property.
Because the identification period moves quickly, it is a good idea to start looking for replacement properties before your original property is sold. Having a plan in place and working with a Qualified Intermediary early can help you stay on track and avoid missing this important deadline.