1031 Exchange Timeline Requirements and Holidays

For a majority of IRS Tax dates, should a deadline fall on a weekend or holiday, you have until the following business day to complete that task. For example, if Tax Day, April 15, falls on a Saturday then you have until Monday, April 17 to file your individual tax return. The same is NOT true for your Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange timeline requirements. Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange s are unique in that federal holidays, and weekends, count as any other day in your 45-day Identification and 180-day exchange periods.

We are often asked, “If one of my Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange deadlines fall on a non-business day or afederal holiday, does that mean I have until the following business day to complete the task?”

The answer isn’t what you might assume. The short answer is No. If one of your exchange timeline requirements, such as your 45-day Section 1031(a)(3) and Section 1.1031(k)-1(c) provides that a written unambiguous description of the intended replacement property or properties, signed by the taxpayer must be sent to the qualified intermediary or other person who is a party to the exchange and who is not a disqualified person. Identification or your 180-day exchange period falls on a federal holiday, or even just a weekend, you do NOT have until the following business day. In order for your 1031 exchange to remain valid you need to complete the task on or prior to the date of business closure, whether that be due to a federal holiday or weekend.

Below is a breakdown of how you should treat your Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange timelines should they fall on federal holidays or weekends:

45-day Identification Period

Your 45-day Section 1031(a)(3) and Section 1.1031(k)-1(c) provides that a written unambiguous description of the intended replacement property or properties, signed by the taxpayer must be sent to the qualified intermediary or other person who is a party to the exchange and who is not a disqualified person. Identification Period is relatively unaffected by federal holidays and weekends. Below are excerpts from the Regulations:

(b) IDENTIFICATION & RECEIPT REQUIREMENTS

(1) IN GENERAL. In the case of a deferred exchange, any replacement property received by the taxpayer will be treated as property which is not of a like kind to the relinquished property if –

(i) The replacement property is not "identified" before the end of the "identification period," or

(ii) The identified replacement property is not received before the end of the "exchange period."

(2) IDENTIFICATION PERIOD AND EXCHANGE PERIOD.

(i) The identification period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the 45th day thereafter.

(ii) The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer's return of the tax imposed by chapter 1 of subtitle A of the Code for the taxable year in which the transfer of the relinquished property occurs.

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(2) MANNER OF IDENTIFYING REPLACEMENT PROPERTY. Replacement property is identified only if it is designated as replacement property in a written document signed by the taxpayer and hand delivered, mailed, telecopied, or otherwise sent before the end of the identification period to either –

(i) The person obligated to transfer the replacement property to the taxpayer (regardless of whether that person is a disqualified person as defined in paragraph (k) of this section); or

(ii) Any other person involved in the exchange other than the taxpayer or a disqualified person (as defined in paragraph (k) of this section).

(iii) Examples of persons involved in the exchange include any of the parties to the exchange, an intermediary, an escrow agent, and a title company. An identification of replacement property made in a written agreement for the exchange of properties signed by all parties thereto before the end of the identification period will be treated as satisfying the requirements of this paragraph (c)(2).

(3) DESCRIPTION OF REPLACEMENT PROPERTY. Based on the above regulations, even if day 45 falls on a weekend or federal holiday, when most businesses in the industry are closed, you could technically still submit the identification on day 45 via email, fax, or mail so long as all the above requirements are fulfilled. That being said, we strongly encourage you to complete your identification in advance of day 45, so you don’t risk the chance of missing this critical deadline.

180-day Exchange Period

Alternatively, your 180-day The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange deadline can be affected by federal holidays or weekends. If day 180 falls on a federal holiday, or weekend, you will need to complete the purchase of your replacement property PRIOR to day 180 because the parties responsible for facilitating the purchase closing will likely be closed and unable to complete the close of the Replacement Property purchase on day 180.

2023 Federal Holidays

Below are the recognized Federal Holiday by the IRS for the upcoming year, 2023:

^{*If a holiday falls on a Saturday, for most Federal employees, the preceding Friday will be treated as a holiday for pay and leave purposes. (See 5 U.S.C. 6103(b).) If a holiday falls on a Sunday, for most Federal employees, the following Monday will be treated as a holiday for pay and leave purposes. (See Section 3(a) of Executive Order 11582, February 11, 1971.) See also our Federal Holidays – "In Lieu Of" Determination Fact Sheet at https://www.opm.gov/policy-data-oversight/pay-leave/work-schedules/fact-sheets/Federal-Holidays-In-Lieu-Of-Determination.}

^{**This holiday is designated as "Washington’s Birthday" in section 6103(a) of title 5 of the United States Code, which is the law that specifies holidays for Federal employees. Though other institutions such as state and local governments and private businesses may use other names, it is our policy to always refer to holidays by the names designated in the law. Your Qualified Intermediary (QI) will work closely with you to ensure you are aware of your upcoming Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange timeline requirements, but don’t assume your Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange recognizes government office closures.}

Your Qualified Intermediary (QI) will work closely with you to ensure you are aware of your upcoming Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange timeline requirements, but don’t assume your Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange recognizes government office closures.