The 1031 Exchange Timeline
Leila Bradley, CES® | Towne 1031 Exchange, LLC
Certain timelines for a 1031 Exchange must be followed for an exchange to be successful. If you are thinking about a 1031 exchange (also referred to as a Starker Exchange), we've provided several details below to outline the most notable times you will want to consider when going through the 1031 process.
1031 Exchange Agreement
Once Towne 1031 Exchange receives a copy of the contract for the sale of your relinquished property, we will prepare an Exchange Agreement that will be signed by you and Towne 1031. This agreement includes the following:
- Establishes Towne 1031 Exchange, LLC as the qualified intermediary for your exchange,
- Provide evidence of the Taxpayer's (i.e., you) intent to exchange,
- Assigns your interest under the sale contract to Towne 1031 Exchange, LLC, and instructs direct deeding of the relinquished property to the buyer,
- Provides notice of the assignment to the buyer.
Closing of the Relinquished Property
Proceeds from the Relinquished Property sale are paid directly to Towne 1031 Exchange to be held in a separate account at TowneBank until funds are used to purchase your Replacement Property or until the end of the exchange period. You can use this calculator to determine your deadlines based on your closing dates.
The 45-Day Identification Period
You have 45 days from the date of the closing to formally identify any potential replacement properties. Identification must be specific, in writing, signed by the Taxpayer, and returned to Towne 1031 Exchange prior to the end of the 45-day Identification Period. Towne 1031 Exchange will provide the Taxpayer a form to complete which will allow them to identify replacement properties. After the 45-day deadline expires there can be no changes made to the list of properties identified. If no property is identified, the exchange funds will be returned to the Taxpayer after the 45th day.
The 180-Day Purchase Period
Identified replacement properties must be purchased on or before 180 days from the relinquished property closing date. If the 180-day deadline for an exchange falls in the following tax year (after December 31st of the year the exchange began) you will need to make sure to close on their replacement property prior to filing taxes for the year the exchange began. If the 180-day deadline falls after the deadline to file taxes (April 15th), an extension for the tax filing should be filed to allow time to complete the exchange.
Closing of the Replacement Property
After Towne 1031 Exchange receives a copy of the replacement property contract, documents will be prepared that assign the taxpayer’s interest under the purchase contract to TOWNE 1031 EXCHANGE, LLC, and instructs direct deeding of the relinquished property to the buyer. Documents will also provide notice of assignment to the seller and authorize Towne 1031 Exchange to wire funds directly to the replacement property closing where the title will be transferred directly to the Taxpayer.
Completion of the 1031 Exchange
The 1031 exchange is considered complete when all exchange funds have been used to purchase one or multiple replacement properties or after the expiration of the 180-day deadline. If funds remain in the exchange account after the 180-day deadline they will be returned to the taxpayer.
Meet the 1031 Exchange Specialists
Towne 1031 Exchange does not provide tax or legal advice. Please consult an accountant and/or attorney.
The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.