Miss Either Deadline, Pay the Tax
A 1031 exchange lets you sell an investment property and defer capital gains tax by buying a replacement. But it has two non-negotiable deadlines:
| Deadline | Days | What Happens |
|---|---|---|
| Identification | 45 days | Name up to 3 replacement properties in writing |
| Closing | 180 days | Close on one of the identified properties |
Calendar days. Not business days. Weekends count. Holidays count. Miss by one day = full capital gains tax.
Real Example
Sarah sells an Austin duplex for $420K. Gain: $140K. Tax at 25%: $35,000.
Her 1031 exchange timeline:
- Day 0: Austin duplex closes. QI holds $420K.
- Day 31: Makes offer on Memphis fourplex ($380K)
- Day 45: Submits identification letter (Memphis + 2 backups)
- Day 97: DSCR loan approved
- Day 132: Closes on Memphis fourplex
- $35,000 tax deferred
She closed 48 days early. Smart — one lender delay at day 175 and she would have owed the IRS $35K.
The 3 Things That Kill Exchanges
- Touching the money. Sale proceeds must go to a Qualified Intermediary, never your bank account.
- Buying an unidentified property. Found a better deal on day 90? Too bad — if it wasn't on your day-45 list, it doesn't qualify.
- Using a disqualified intermediary. Your attorney, CPA, or agent cannot serve as QI.
Buffer Rules
- Identify by day 30 (15-day buffer)
- Target closing by day 150 (30-day buffer)
- Have backup financing ready (hard money can close in 7-10 days)
Free Tools
- 1031 Exchange Calculator — model your tax deferral
- Full timeline guide
- Capital Gains Tax Calculator
The exchange costs $3,000. The tax costs $35,000. The math is obvious — but only if you hit the deadlines.
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