Year end commercial real estate closings affect on 1031 exchange period of 180 days
Year End Commercial Real Estate Closings
Just a reminder that if your utilizing section 1031 of the IRS code to defer capital gains taxes, a closing on your down leg (relinquished property) before the end of the year can affect your normal 180 day exchange period for you to close on your up leg (replacement property).
Internal Revenue Code § 1.1031(k)-1(b) (ii) explains as follows: “(ii) The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer’s return of the tax imposed by chapter 1 of subtitle A of the Code for the taxable year, in which the transfer of the relinquished property occurs.“ This means that your exchange period ends on the earlier of 180 days or April 15th.
There is, however, an easy solution, file an extension (form 4868) prior to your normal return filing due date. If your down leg closed or is closing between October 18, 2017 and December 31, 2017, file an extension to get your full 180 days to close on the replacement property.
Also remember that your 45 day identification period runs concurrently with the 180 day closing period.
As always, if you’re looking for a replacement property to satisfy the requirements of IRS section 1031, whether it’s like – kind commercial real estate in Santa Monica, California, Columbus, Ohio or anywhere else in the United states, feel free to contact me, Scott Harris, 310-473-4789 or 614-905-6614