The identification period in a 1031 exchange refers to the time frame within which the replacement property must be identified. The Internal Revenue Code sets forth specific rules for the identification period, including the number of days during which the replacement property must be identified.
Key-Takeaway
- The identification period in a 1031 exchange refers to the time frame within which the replacement property must be identified.
- The Internal Revenue Code sets forth specific rules for the identification period, including the number of days during which the replacement property must be identified.
Example
Suppose an investor sells a commercial property in a 1031 exchange and plans to purchase a replacement property. The investor must identify the replacement property within 45 days of the sale of the original property, and must provide a written description of the property to the qualified intermediary.
Tips
- Familiarize yourself with the rules for the identification period in a 1031 exchange.
- Plan ahead to ensure that the identification period is sufficient to locate and identify a suitable replacement property.
Recommendations
- Work with a qualified intermediary or other professional to assist in the 1031 exchange process, including the identification of replacement property within the required identification period.
- Consider alternative investment strategies if the identification period requirements may not be feasible or desirable.
- Carefully evaluate the risks and rewards of a 1031 exchange, taking into account the identification period requirements and their potential impact on the investment.
