Understanding the 45 and 180-Day Rules for 1031 Exchanges
There are two timing requirements in every 1031 exchange. The two rules are the 45 and 180-day rule. While both are important, the 45-day rule always has more questions about what it means and how it works.
What the 45-day rule says is that on the day you sell your relinquished property, the exchanger(client) has 45 days to identify their replacement property. Many things can happen during this time period; these are the most common. Remember, 45 days means 45 calendar days, not business days.
- Within the first 45 days of the exchange the exchanger can identify up to three properties of any value.
- If the exchanger wants to buy more than three properties, they can identify more than three properties as long as the combined value of the properties does not exceed 200 percent of the relinquished property sale price.
- They must close on at least one of these identified properties in 180 days from the date of sale of the relinquished property sale.
- If the exchanger cannot identify any properties within the first 45 days or close on any of their intended properties within the 180 days, the exchange will be incomplete.
The 180-day rule states that you must take title to the replacement property (properly identified property) within 180 days after the sale of the relinquished property. These are calendar days, not business days.
If you need more help or clarification with the 45-day rule, call us at 239-333-1031.