1031 Exchange Trap – You Could Have Less Than 180 Days

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IRC Section 1031’s regulations state, “The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer’s return of tax imposed by chapter 1 of subtitle A of the Code for the taxable year in which the transfer of the relinquished property occurs.” 

Thus, the regulations generally allow for 180 calendar days for taxpayers to complete their like-kind exchange transactions.  However, individual taxpayers that began a 1031 exchange after October 19 of the year must understand the exchange period does not guarantee a full 180 days.  The bottom line is that individuals who are unable to purchase replacement property by April 17 should consider filing a tax extension to give themselves the full 180 days. Like-kind exchanges that begin late in the year can also trigger special reporting considerations.