DESIGNATION PERIOD in 1031 exchange refers to the time frame in which the property owner must identify potential replacement properties to acquire in a 1031 exchange transaction. The designation period is typically 45 days from the date of the sale of the original property, also known as the “relinquished property.”
- The designation period is 45 days from the date of sale of the relinquished property.
- The property owner must identify potential replacement properties within the designation period.
The identification must be made in writing and must be signed by the property owner.
John has a rental property that he wants to sell and replace with a larger property. He sells the original property on January 1st, 2023. The designation period for John to identify potential replacement properties is 45 days from the date of sale, which means he has until February 15th, 2023, to identify his replacement properties. John must identify his replacement properties in writing and sign the document. He may also consult with a qualified intermediary or tax advisor to ensure that his identification meets the requirements of a 1031 exchange.
- It is recommended to consult with a qualified intermediary or tax advisor to ensure that the identification meets the requirements of a 1031 exchange.
- Property owners should make sure to properly identify the replacement properties to avoid any potential issues with the IRS.
- Property owners should make sure to adhere to the 45-day deadline, as missing the deadline can result in the loss of the tax benefits of a 1031 exchange.
