THE PROBLEM:  For a Section 1031 Exchange, where the relinquished property was transferred between October 19, 2016, and December 31, 2016, you might not have a full 180 days to close on your replacement property.  The reason lies in Treasury Regulation Section 1.1031(k)-1(b)(ii), which interprets Section 1031 of the Internal Revenue Code, and reads as follows:

“(ii) 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 the tax for the taxable year, in which the transfer of the relinquished  property occurs.”

SO WHAT DOES THIS MEAN? The taxpayer will have the term of 180 days to complete its exchange—BUT– if the taxpayer’s tax filing deadline occurs first, the exchange period will instead expire on its tax filing deadline.  In the majority of cases, the date most taxpayers have as their deadline to file their tax return is April 15th.  See the Section 1031 Exchange Timeline here.

THE SOLUTION TO THE PROBLEM:  The taxpayer can file for an extension to file their tax return, which will result in the taxpayer having the full opportunity of closing on its replacement property for the full 180 day exchange period.

EXAMPLE Tom T. Taxpayer sells his investment property on November 4, 2018, and executes all of the paperwork to do a Section 1031 Tax Deferred Exchange. His 180th day is May 1, 2019, but unless he files an extension for filing his personal return, his exchange period will expire on April 15, 2019.  If Tom T. Taxpayer filed an extension for his personal return, he would have until May 1, 2019, to complete his Section 1031 exchange.

Liberty 1031 always recommends that the taxpayer consult with their tax and/or legal counsel on all matters dealing with the Internal Revenue Service.

For more information on Section 1031 issues go to our website:  and visit our 1031 FAQ, Section 1031 Basics, and Section 1031 Case Studies.   We look forward to working with you on future Section 1031 exchanges– Steve

Enjoy 1031 Day!

section 1031 exchange


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