Top 50 Questions about Farmland
A 1031 tax-deferred exchange lets you reinvest the proceeds from a property sale into another like-kind property while deferring capital gains taxes. To make the most of this strategy, you must follow the IRS timelines closely. When you understand these deadlines, you can plan ahead and keep your exchange on track.
Key Time Limits in a 1031 Exchange
Closing Date (Sale Date)
The closing date marks the official sale in a 1031 exchange. This is the moment when funds change hands. Although the auctioneer may say “sold” at the event, the transaction does not begin until closing. Because everything depends on this date, make sure you confirm it with your closing agent.
45-Day Identification Period
Once the property closes, the 45-day identification window begins. During this period, you must identify your potential replacement properties. To stay compliant, follow one of the IRS-approved methods:
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Three-Property Rule: Identify up to three properties of any value.
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200% Rule: Identify properties that total no more than 200% of your sold property’s value.
Because this timeline is strict, you should start evaluating options early.
180-Day Closing Period
After the same closing date, the 180-day period begins. During this time, you must complete the purchase of your replacement property. Since these steps often involve inspections, negotiations, and lender approvals, you should plan ahead to avoid delays.
How the 1031 Process Works
A qualified intermediary plays a key role throughout the exchange. The intermediary holds your sale proceeds in a secure trust account that is designated for your transaction. Since the IRS prohibits you from accessing these funds directly, the intermediary transfers the money to purchase your replacement property once you are ready. Because the rules are strict, working with a qualified intermediary keeps the exchange compliant from start to finish.
Key Takeaways
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The closing date, not the auction date, starts both the 45-day and 180-day deadlines.
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You have 45 days to identify replacement properties and 180 days to close on the new purchase.
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A qualified intermediary manages all funds to ensure the exchange meets IRS requirements.
If you want expert help navigating your 1031 exchange, contact David Whitaker – Iowa Land Guy for clear guidance and proven support.
David Whitaker | Iowa Land Guy
