Apollo AdvisingThe 1031 exchange timeline, step by step
How the 45-day identification and 180-day closing deadlines work in a 1031 exchange, the identification rules, and what to line up before you list.
Short answer. In a standard delayed 1031 exchange, you have 45 days after closing the sale to identify replacement property in writing, and 180 days to close on it. Both clocks start the same day and run at the same time. The 180 days end sooner if your tax return for that year is due first, unless you file an extension.
The timeline
Apr 15
- Before you list. Decide whether an exchange makes sense at all, and engage a qualified intermediary before the sale closes. If the sale proceeds reach you, even briefly, the exchange generally fails. Ask your CPA to estimate the gain and depreciation recapture so you know what is being deferred.
- Day 0: the sale closes. Proceeds go to the qualified intermediary, not to you. Both deadlines start now.
- Days 1 to 45: identify. Deliver a signed, written list of replacement properties to your intermediary by midnight of day 45. There is no extension for weekends or holidays.
- Days 46 to 180: close. Buy one or more of the properties on your list by day 180, or by your tax return due date if that comes first.
To get your exact dates and a calendar file with both deadlines, use the 1031 deadline calculator.
How many properties you can identify
Most investors use one of two rules:
- Three-property rule: up to three properties of any value.
- 200% rule: any number of properties, as long as their combined value is no more than twice the value of the property you sold.
A third rule allows more if you end up buying at least 95% of the total value identified, but it leaves little room for error. Identifying backup properties is the single best protection against missing the 45-day deadline.
What full deferral usually takes
To defer all of the tax, investors generally need to:
- Buy replacement property of equal or greater value than the property sold
- Reinvest all of the net proceeds
- Replace any debt that was paid off, with new debt or added cash
- Take title the same way the old property was held
Cash left over or debt that is not replaced, often called boot, is generally taxable. Both properties must be real property held for investment or business use. A primary home and property held mainly for resale do not qualify.
Where exchanges usually go wrong
- No backup properties, so one failed deal sinks the whole exchange
- Touching the money or arranging the intermediary after closing
- Buying for less than the sale price without realizing part of the gain becomes taxable
- Rushing into a weak replacement property to beat the clock
Changing property types, or stepping back from managing
Like-kind is broader than most owners expect. A rental house can be exchanged for a small apartment building, a commercial building with a long-term tenant, or land, as long as both are held for investment or business use. Owners use exchanges to consolidate several properties into one, spread one property's equity across several markets, trade up to a larger property, or move from hands-on landlording to something that takes less of their time.
Some investors who want to stop managing property altogether look at a Delaware Statutory Trust (DST) as replacement property. A DST holds professionally managed real estate, such as apartment communities or net-lease commercial buildings, and sells fractional interests to investors. A DST interest can generally qualify as like-kind replacement property, which is why DSTs come up so often in 1031 conversations.
A DST is also a security, with real tradeoffs: the investment is typically illiquid for years, you have no say in how the property is run or when it is sold, and sponsor fees and terms vary widely. Talk with a licensed investment adviser before you identify a DST or any other security as replacement property. Apollo Advising does not evaluate or recommend DSTs. That advice is available through Nashional Independent Investment Management LLC, a registered investment adviser affiliated with Denver McClure, under a separate agreement, or through any adviser you choose.
Where we fit
The tax rules are the easy part. The harder question is whether you want another property, and which one. We help you decide whether to exchange at all, screen replacement markets and properties before the clock starts, and prepare questions for your intermediary, CPA, and attorney. Apollo Advising is not a qualified intermediary and does not give tax or legal advice.
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Free worksheet: hold, sell, or 1031?
The 12 questions Denver works through with every owner deciding whether to keep, sell, or exchange a rental, in a two-page PDF. Plain language, no sales pitch.
Go deeper
1031 exchange deadline calculatorEnter your closing date to get your 45-day and 180-day dates, a tax-return warning, and a calendar file.When a 1031 exchange does not make senseSix situations where paying the tax can beat deferring it, and how to run the comparison.Depreciation recapture: the tax most rental sellers forgetWhat recapture is, why it applies even if you never claimed depreciation, and how to estimate it before you list.Inherited a rental property? What to decide firstStepped-up basis, the first 90 days, and how heirs compare keeping, selling, and exchanging.This page is general education, not legal, tax, investment, insurance, or lending advice. See our disclosures.