The G(6) Limitation in a 1031 exchange refers to the requirement that a taxpayer must identify potential replacement properties within 45 days of selling the relinquished property and must close on at least one of the identified properties within 180 days of the sale. The G(6) Limitation is so named because it is found in Treasury Regulation Section 1.1031(k)-1(g)(6).
Key-Takeaway
- The G(6) Limitation requires taxpayers to identify potential replacement properties within 45 days of the sale and to close on at least one of the identified properties within 180 days of the sale.
- Failure to meet the G(6) Limitation requirements can result in the invalidation of the 1031 exchange and the capital gains tax being due.
Tips
- Plan ahead and identify potential replacement properties well before the 45-day deadline to ensure there is enough time to close on a property.
- Consider using a qualified intermediary to assist with the identification and closing process.
Recommendations
- Seek the advice of a tax professional and real estate attorney to ensure compliance with the G(6) Limitation and all other 1031 exchange regulations.
- Carefully consider the terms and conditions of the replacement properties and ensure that they meet all requirements for a 1031 exchange.
