When does the 1031 Exchange 45-day period start? If you’re selling an investment property, you might assume the clock begins when you sign the sales contract. But signing a contract and closing the sale are two different events. Tom Moore, President of Equity Advantage, walks through how the closing establishes the starting point, where the settlement statement fits in, and why the transfer of ownership responsibilities helps clarify the date.
When the 1031 Exchange 45-Day Period Starts
When selling a property through a 1031 Exchange, it’s important to know exactly when your 45-day period begins. While it’s easy to think the period starts when you sign the sales contract, it actually starts when escrow closes on the property you’re selling.
The question, then, is how to determine when exactly the sale closed.
Finding Your Exact 45-Day Period Start Date
How you should identify the exact closing date is sometimes open to debate, as the settlement date and the date the deed records don’t always match. But Equity Advantage generally uses the settlement date listed on your final settlement statement as the start of your 45-day period.
This date should also coincide with the proration dates for taxes and insurance, reflecting when the new owner takes on the benefits and burdens of ownership, including responsibility for those expenses and entitlement to rental income.
Take the rent, for example. Whether you’re selling a single-family rental or a multi-unit property, the rental income is divided between you and the buyer to reflect the ownership transfer. Those rent prorations should line up with the settlement date, just as the tax and insurance prorations should.
Know Your Timeline for the Next Purchase
As you consider what you want to buy next, knowing the exact date your 45 days begin gives you a clearer idea of the timeline available for you to identify a replacement property. To find your exact date, look at the date listed on your final settlement statement or reach out to your Exchange expert to help you confirm the correct date.
If you’re currently considering replacing an investment property through a 1031 Exchange, contact Equity Advantage today to talk through your identification timeline and how it fits your next purchase.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
FAQs About the 1031 Exchange 45-Day Period
When does the 1031 Exchange 45-day period start?
It begins when escrow closes on the sale of the property you’re exchanging. Equity Advantage generally uses the settlement date listed on the final settlement statement.
Does the recording date always determine when the 45-day period starts?
Not necessarily. The recording date may differ from the settlement date, which should align with the transfer of ownership responsibilities and the property’s income and expense prorations.
Does the 180-day period begin after the 45-day period ends?
No. Both periods begin when the sale closes and run at the same time.
