All 1031 exchanges — regardless of type — have a 45-day identification period and a 180-day exchange period. These are strict, statutory deadlines with no extensions or exceptions available.

There are no extensions. There are no exceptions. Missing either deadline results in a fully taxable transaction. Planning ahead with experienced legal counsel is essential.

The 45-Day Identification Period

For a 1031 exchange to be in accordance with IRC § 1031, within 45 days of the close of the sale of the Relinquished Property, the taxpayer must identify their potential replacement property or properties in writing to the Qualified Intermediary. The replacement property description must be unambiguous and specific — using a physical address or legal description.

The Three Identification Rules

There are three distinct identification rules that a taxpayer can use. The taxpayer chooses the rule most appropriate for their specific exchange situation:

Three Property Identification Rules

  • 3-Property Rule — A taxpayer can identify up to three properties without regard to their fair market value. They must close on at least one of the identified properties for the exchange to be valid.
  • 200% Rule — A taxpayer can identify more than three properties, but the fair market value of all properties combined cannot exceed 200% of the fair market value of the Relinquished Property.
  • 95% Rule — A taxpayer can identify an unlimited number of properties (even exceeding 200% of relinquished value), but they must acquire at least 95% of the fair market value of all properties they identify.

The 180-Day Exchange Period

All 1031 exchanges have a 180-day time limit starting from the day of the close on the sale of the Relinquished Property. If the taxpayer has not completed the purchase of the Replacement Property before or on day 180, then the exchange is closed and the taxpayer must recognize and pay taxes on the proceeds from their Relinquished Property sale.

It is important to note that the exchange period could be shorter than 180 days if the individuals tax return is due before the 180th day. If that is the case, an extension on filing the tax return would be necessary to preserve the full exchange period.

Starting Right Matters

The exchange clock begins the day you close on your relinquished property — not the day you engage counsel. This is why it is critical to engage your legal team and Qualified Intermediary before you sign the sales contract on the property you are selling. Proper planning from the outset protects your tax deferral from day one.