UNDER A DEFERRED EXCHANGE, WHEN MUST THE REPLACEMENT PROPERTY BE IDENTIFIED (AND SUBSEQUENTLY ACQUIRED BY THE EXCHANGOR)?
Section 1031 treatment will not apply if the replacement property is not “identified” before the end of the “identification period” or the identified replacement property is not received before the end of the “exchange period.” The identification period ends 45 days after the date on which the taxpayer transfers the property relinquished (i.e. the closing). The property identified must then be acquired no later than: A. 180 days after the date of initial transfer of the relinquished property (i.e. also the first closing), or B. The due date, including extensions, for the exchangor’s tax return for the year in which the transfer of the relinquished property occurs. Unlike the grace period under Section 7503 for the filing of tax returns and Tax Court Petitions (allowing their submission on the next business day when the due date falls on a weekend or holiday date), the 45- and 180-day rules are strictly construed.
