The 45 and 180 day clock, in plain English.
Two deadlines decide whether your exchange holds. Here is how each one actually works, and what happens if you miss them.
Two dates, set in federal law
A 1031 exchange runs on two deadlines, and both start the day your sale closes. You have 45 days to identify your replacement candidates in writing. You have 180 days to actually close on one of them. The 45 sits inside the 180. It is not added to it. Miss either and the exchange is over.
The dates run on calendar days. Weekends count. Holidays count. There is no routine extension, and you cannot buy one. Narrow federal disaster relief is the only thing that ever moves these dates, and it is not something you can plan around. Treat both as fixed from the morning the sale records.
The 45-day identification rules
Identifying does not mean buying. It means naming, in a signed writing delivered to your intermediary, the specific properties you might purchase. You get one of three ways to do it, and you pick the one that fits the shape of your search.
- Three-property rule: name up to three properties, at any price. This is the one most buyers use.
- 200 percent rule: name as many as you like, as long as their combined value is no more than twice what you sold. Useful for spreading across several smaller assets.
- 95 percent rule: name as many as you like at any value, but you must close on at least 95 percent of the total you named. Rarely the right tool, and unforgiving when you reach for it.
The rules are alternatives, not a checklist. You satisfy one of the three. Most exchangers live inside the three-property rule and never need the others.
When to identify
Do not wait until day 44. A list filed in a panic on the last afternoon is a list you did not get to test. But do not file on day 5 either. Identifying that early trades away your most valuable asset, which is the option to keep looking while you learn. The middle of the window, somewhere around day 20 to 30, tends to give you both: enough intelligence to choose well, enough commitment to move.
Working back from 180
The closing deadline is not something you handle at the end. It is something you reverse-engineer from the start. To close by day 180, you want a letter of intent in hand by day 60 to 90, a purchase agreement signed by roughly day 120, and due diligence finished with margin by day 150. Build in slack, because the other side will use some of yours.
- Day 0
- Relinquished sale closes; both clocks start
- By day 45
- Replacement candidates identified in writing
- Day 60 to 90
- Letter of intent in hand
- By day 120
- Purchase agreement signed
- By day 150
- Due diligence complete
- By day 180
- Replacement closes
Illustration of a working pace. Your deal sets the exact dates.
What missing the clock costs
If you do not identify by day 45, the exchange collapses and your intermediary returns the funds. If you identify but cannot close by day 180, same result. The gain you tried to defer becomes a gain you recognize. You pay long-term capital gains, then depreciation recapture on top, then the net investment income tax, then your state. The clock is not paperwork. It is the difference between deferring the tax and paying all of it at once.
The clock is not paperwork. It is the difference between deferring the tax and paying all of it at once.
- Identification timelines and the three identification rules are set by IRC Section 1031 and Treasury Regulation 1.1031(k)-1. Confirm the exact subsection cite before publication.
- This is general information about the exchange process, not tax advice. Your own facts decide your result; confirm them with your tax adviser.