New Year Reminder to Anyone in the middle of a 1031 Exchange.
In a 1031 exchange, the taxpayer must acquire all replacement property by the earlier of the date that is 180 days from the date the relinquished property closes, or the date the tax return for the year in which the relinquished property closed is due, including extensions. This means that for exchanges where the relinquished property closes late in the year (from approximately October 15th until the end of the year), a calendar year taxpayer must get an extension of the tax filing deadline in order to benefit from the full 180 day exchange period. For example, if the relinquished property closed on December 1, 2010, and the taxpayer does not get an extension on the filing of his return, the taxpayer will only have until April 18, 2011 to acquire all replacement properties. (The 2011 tax filing date has been extended to April 18 because of a Washington, D.C. holiday.) If the taxpayer gets an extension, however, he will have until May 30, 2011 to acquire all replacement properties.
Once a tax return is filed, it cannot be amended to include the exchange or to obtain an extension of time to complete the exchange. If the exchange is incomplete, the sale will need to be reported as a taxable event.
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