Delayed or deferred exchange time constraints. There are only a few rules which are critical to making your exchange qualify. The most significant is the allowance of time in which you have available to complete a delayed or deferred exchange.
So here are the two time-sensitive rules you need to remember.
The first important time rule is you have a total of 180 days in which to sell your relinquished or exchange property and actually buy and close on your replacement property or properties which is called the “exchange.” Also, if you buy more than one, make sure the last one you close is still within that 180-day window, or it will not qualify.
Now often you’ll hear a qualifier or a caveat regarding the 180 day exchange period, which can be very important. And that is this, you actually have 180 days or whenever your tax return is due, which comes first.
So what does that mean?
This means if you close your relinquished or exchange property late in the year, say for instance, around Thanksgiving, you won’t have a full 180 days between then and your tax return, which is due on April 15th.
Okay, so if that is the case for your transaction, in order to get the full 180 days, you’ll be needing to file an extension in order to include your exchange in your return. That’s what the tax return qualifier really means.
The second important rule after you close your relinquished or exchange property is that you have 45 days from that closing in which to name candidate or target properties in which to exchange.
So that first 45 days out of the total of 180 is called the identification period. Also, this is important to remember. You must identify under some basic rules. The only time you don’t really have to identify is if all your replacement property has already closed within that 45-day window, that’s kind of defacto identification.
Anyway, isn’t it?
There are two rules for identifying and one exception, which we cover elsewhere. But let me give you the rule, which is used 95% of the time. It is this the three property rule, and here you go, you can name or identify any three properties of any value, but your identification must be in writing and it must be transmitted or postmarked within that 45-day period.