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Are Multiple Relinquished Properties Allowed?

David Gorenberg, Esq., CES®
06/06/23
If you start a 1031 Exchange by selling one investment property, are you able to sell a second investment property as part of the same exchange after the 45-day identification period? The short answer is yes, learn more about it within this article.
Selling Multiple Relinquished Properties in the same 1031 exchange

Exchangers often ask whether they can start a 1031 exchange by selling an investment property, and then sell a second investment property as part of that same exchange, after the 45-day identification period closes. The short answer is yes.

The typical 1031 Exchange transaction involves selling one property, identifying potential replacement properties within the 45-day Identification Period, and then acquiring one or more of those identified properties within the 180-day Exchange Period. The 1031 Exchange regulations provide that, “If, as part of the same deferred exchange, the taxpayer transfers more than one relinquished property and the relinquished properties are transferred on different dates, the identification period and the exchange period are determined with reference to the earliest date on which any of the properties are transferred.”

Consider the following 1031 Exchange scenario:

  • Exchanger transfers Relinquished Property A on June 1, 2023
  • The 45-day Identification Period ends on July 16, 2023
  • The 180-day Exchange Period ends on November 28, 2023
  • On July 16, Exchanger properly identifies Property Z as Replacement Property
  • On August 1, 2023 Exchanger disposes of additional investment property, Property B, as another Relinquished Property within the same exchange
  • Exchanger acquires the identified Replacement Property, Property Z, on September 1, 2023

The above scenario is entirely permissible, since Exchanger has transferred both of the Relinquished Properties before acquiring the Replacement Property.

Similarly, Exchanger could have identified Properties X, Y & Z during the Identification Period, and thereafter acquired Properties Y & Z, provided both acquisitions were completed within the 180-day Exchange Period. 

In the above scenario, Exchanger should be aware of the following considerations to ensure for full tax deferral: 

  1. Property Z is worth equal or more than the combined value of Properties A & B
  2. All of the exchange cash generated by the dispositions of Properties A & B are applied toward the acquisition of Property Z
  3. Any debt retired upon the transfer of Properties A & B was replaced with new debt or new cash in the acquisition of Property Z