The Clock Starts at Closing, Not at Listing
A 1031 exchange runs on two federal deadlines that both start on the same day: the day the relinquished property closes escrow. Missing either one disqualifies the exchange, so the practical value of a checklist is keeping the calendar, not the tax theory, in view [1].
Day 0: Close the Sale Through a Qualified Intermediary
Before the sale closes, the exchanger must have a Qualified Intermediary (QI) in place. The QI receives the sale proceeds directly — the exchanger cannot touch the cash without breaking the exchange — and holds them until replacement property is acquired [1].
Days 1–45: Identify Replacement Property
Within 45 calendar days of closing, the exchanger must deliver a written identification of replacement property to the QI. The IRS allows identifying up to three properties regardless of value, or more than three under specific valuation rules; a DST interest can be one of the identified properties [1].
Days 46–180: Close on the Replacement Property
The exchanger has 180 calendar days from the original closing — not 180 days from identification — to close on the replacement property or DST interest. Both deadlines run concurrently from day zero, so the 45-day window sits inside the 180-day window rather than adding to it [1].
After Closing: File Form 8824
The exchange is reported to the IRS on Form 8824, filed with the tax return for the year the relinquished property closed. The form reconciles the realized gain, recognized gain (if any boot was received), and the basis carried into the replacement property [2].
Checklist Summary
- Close the sale through a Qualified Intermediary who holds the proceeds.
- Identify replacement property in writing within 45 calendar days of closing.
- Close on the identified replacement property within 180 calendar days of the original closing.
- Confirm any boot received (cash, debt relief, or non-like-kind property) before closing, since boot is taxable in the year received.
- File Form 8824 with the tax return covering the year the original property closed.
References
[1] https://www.irs.gov/newsroom/like-kind-exchanges-under-irc-code-section-1031
[2] https://www.irs.gov/forms-pubs/about-form-8824
Frequently asked questions
Can a DST interest count as one of my three identified replacement properties?
Yes. A DST interest is treated as real property for exchange purposes and can be listed as one of the properties identified within the 45-day window, alongside or instead of a directly owned replacement property.
What happens if I miss the 45-day identification deadline?
The exchange fails and the transaction is treated as a taxable sale; there is no extension available for missing the 45-day identification window absent a federally declared disaster postponement.
Does receiving boot always make the entire exchange taxable?
No — generally only the amount of boot received is taxable in the year of the exchange, and the remainder of the transaction can still qualify for like-kind deferral.