1031 Exchanges – October 18 to December 31 2012
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This is review and reminder to a post earlier in the year.
A 1031 exchanger must complete the acquisition of a replacement property in a 1031 exchange before midnight on the earlier of the 180th day after the date the relinquished property was transferred, or the due date (including extensions) for the income tax return for the taxable year in which the transfer of the relinquished property occurs. (U.S. Treasury Regulations section 1.1031(k)-1(b)(2)).
Even though an exchanger may be entitled to a tax extension, they must actually file IRS Form 4868 with the IRS to obtain the tax extension. Consequently, some exchangers closing late in 2012 may need to file for an extension to have the benefit of the entire 180-day exchange period. As a general rule, exchangers should not file a 2012 Federal Income Tax return until the 1031 exchange is complete.
More specifically, if the 180th day following the closing of the first relinquished property falls after the due date for filing the 2012 tax return (generally April 15, 2013 for individuals), an exchanger must file IRS Form 4868 with the IRS to actually extend the filing date. If a 1031 exchanger does not file for such an extension, they will not be able to acquire any replacement property in an exchange after the tax return due date.
