Help! My 45 day deadline is tomorrow. Can the IRS give me an extension?
The IRS was very specific concerning the deadlines surrounding 1031 Exchange. You have 45 calendar days from the date you closed sale on your Relinquished Property to "Identify" your 1031 Exchange Replacement Properties. There is no mention of requesting an extension on the 45 day date or the 180 day date. So, the answer is no.
The best advice is to contact a 1031 Exchange Realtor IMMEDIATELY and have them help you find a property. Failure to "identify" your Replacement Properties within the 45 day deadline will terminate your 1031 Exchange.
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If I close sale close before the 45 day deadline, do I still have to identify?
No. Because you closed sale on your Replacement Property before the 45 day Identification period is over, any Replacement Property received by you before the end of the identification period is treated as being properly identified under the Identification Rules. Some tax payers find this advantageous making the whole process quick and easy.
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My biggest worry about doing a 1031 Exchange is the 45 day deadline. Help?
Yes, you have 45 days to identify Replacement Properties once you convert your sale into a 1031 Exchange. You are right that doesn't seem like a lot of time. We encourage to you find a local 1031 Exchange Real Estate Professional who can help you find some qualified replacements. Careful planning before you sell your property is not out of the question. Many people already have replacement properties in mind before they sell but if you do not a great place to look in on-line. Try the Exchangers Clearinghouse, our national 1031 Exchange Property Search Engine, it's free! We have new listings being added daily, so check back often.
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How do I beat the 45 day deadline rule in a 1031 Exchange?
The best and ONLY way to "beat" the IRS 45-day Identification Deadline is to Identify your 1031 Exchange Replacement Properties within 45 days of closing sale on the property you are selling. In other words, any attempts to beat this rule other than following it will force your 1031 Exchange to collapse and you will not be able to enjoy the tremendous benefit of deferring your Capital Gains Tax. Any 1031 Exchange Professional who tells you otherwise is either lying, doesn't understand the rule or asking you to commit fraud. As your Qualified Intermediary we can recommend some solid strategies that will help you with this rule. Many tax payers have been known to delay the sale of their property until they know for sure that the property they want to buy is available. Some tax payers even put down an earnest money deposit on their Replacement property before they close on their Relinquished property. This is OK, so long as you take back the deposit at the time of closing and not include it with the proceeds from the sale.
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How long does a 1031 Exchange take?
Generally, 1031 Exchanges can happen rather quickly, depending on your needs. If you are closing on your 1031 Exchange Relinquished Property today, you can generally close on a 1031 Exchange Replacement property tomorrow. There are some deadlines to be aware of both of which begin on the date you close on your Relinquished property.
45 day Identification Deadline. This date ends 45 calendar days after you close on your Relinquished property. Basically, this is a letter to the IRS that officially announces the Replacement properties on which you intend to close sale. Any of these properties you Identify can be revoked before the 45 day deadline has been reached. You would just re-write your announcement letter. Realty Exchangers, Inc provides you with the Identification form that you will need to give to the IRS when you close on your Relinquished property. If you close on any Replacement Property before your 45 day deadline is reached, you do NOT have to Identify them with the form.
180 day Closing Deadline. This deadline also begins when you close on your Relinquished property. You have half a year to close on your Identified Replacement properties, which should be ample time to complete this task. If you do not close on all of your Identified Replacement Properties before this date is reached, you could end up paying Capital Gains Tax on all un-spend proceeds.
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I need to change my identified replacement properties. How do I do that?
The Identification of 1031 Exchange replacement properties can be revoked as long as it is done within the 45-day identification period. This revocation must be done in writing and should include a rescission of a purchase and sale agreement, if one was written. The next step would be to write a new Identification letter that includes the properties you intend to close sale on before the 45 day deadline is reached.
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Is there a penalty if I switch my 1031 Exchange identified properties after the 45 day period?
The penalty is that your 1031 Exchange would collapse. The IRS has said that you have 45 days to identify your replacement properties. Soon as that 45 day deadline is reached, your replacements are "locked-in", which means you cannot change them. The good news is that you do have the option of NOT closing sale on all your identified properties without penalty. But you do have to close on at least one of your identified properties. And remember, any remaining proceeds from your 1031 Exchange are subject to the capital gains tax.
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When does a 1031 Exchange become taxable?
1031 Exchange is a Yes/No question according to the IRS. Your 1031 Exchange will become a taxable property sale if you fail to follow the rules that were set down by the IRS over 20 years ago. Not following the following rules can force your 1031 Exchange to become a taxable property sale.
Selling a property that is not considered as Like-Kind.
Not using a 1031 Exchange Safe Harbor.
Withdrawing from your proceeds during 1031 Exchange Period.
Failing to Identify your replacements within the 45 day deadline.
Not closing sale on your replacements before the 180 day deadline.
These are just some of rules to follow, more can be discovered in our FREE 1031 Exchange Procedure Manual, which you can access by clicking here!
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In a 1031 Exchange, how many Replacement Properties can I have?
In a 1031 Exchange, you have 3 choices for determining how many Replacement Properties to Identify. These are the 3 Identification rules set down by the IRS for 1031 Exchange. You may choose which of these rules to follow at any time during the 45 day Identification period. One you have chosen which rule to follow, you may not change your mind after the 45 day deadline.
The 3-Property Rule
The maximum number of replacement properties you may identify is three properties without regard to fair market values of the properties.
The 200 Percent Rule
You may identify any number of properties as long as their total fair market value does not exceed 200 percent of the total fair market value of all Relinquished Properties. You figure fair market value of Replacement Property as of the end of the identification period. You figure fair market value of Relinquished Properties as of the date you transfer them. If, as of the end of the identification period, you have identified more properties as replacement properties than permitted, you are treated as if no Replacement Property has been identified.
The 95 Percent Rule
You may identify any number of Replacement Properties if during the Exchange Period you actually received identified Replacement Properties having a fair market value equal to or more than 95 percent of the total fair market value of all identified Replacement Properties.
Any Replacement Property received by you before the end of the identification period is treated as being properly identified under the Identification Rules.
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