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How to do a 1031 exchange Step 1: Identify the property you want to sell. ... Step 2: Identify the property you want to buy. ... Step 3: Choose a qualified intermediary. ... Step 4: Decide how much of the sale proceeds will go toward the new property. ... Step 5: Keep an eye on the calendar. ... Step 6: Be careful about where the money is.

A 1031 exchange is a tax strategy that allows investors to sell an investment property in exchange for another property, then defer capital gains from the first property's sale. This strategy is advantageous for investors who wish to purchase more real estate rather than cash out. That is a short explanation.

In the United States, a 1031 exchange, also known as a like-kind exchange, allows investors to defer paying capital gains taxes on the sale of a property if they reinvest the proceeds into a "like-kind" property. Canada does not have an exact equivalent to the U.S. 1031 exchange for real estate.

In that case, you already know the process requires strict adherence to tight time frames. First, you must identify potential replacement assets within 45 days of the sale and then complete the purchase transaction within 180 days (including the 45 designated for identification.)

1031 reverse exchanges In a reverse exchange, investors have 45 calendar days from the date of acquiring the replacement property to identify the property to be relinquished. They then have a total of 180 calendar days from the initial purchase to complete the sale of the relinquished property.

You will have 45 days to identify a new property and 180 days to close. During this period, the profits from the sale of your previous investment property will be held in a binding trust.

TIMELINE REQUIREMENTS Measured from when the relinquished property closes, the Exchangor has 45 days to nominate (identify) potential replacement properties and 180 days to acquire the replacement property. The exchange is completed in 180 days, not 45 days plus 180 days.

What this means is that a taxpayer who sold real estate and began a 1031 Exchange after October 19, 2023 must close on the new Replacement Property by the due date of their 2023 tax return, which is April 15, 2024.