Section 1031 End of the Year Deadline Approaches

As we move through Novem­ber every year there are a vari­ety of ques­tions that come from investors involved in a §1031 exchange. Many are focused on try­ing to strike a deal for their replace­ment prop­er­ty before year end. Oth­er investors may also be stressed to accom­plish the clos­ing of the replace­ment prop­er­ty pri­or to year end.

Novem­ber 20, 2025

By Al DiNi­co­la, AIF®
1031 Tax Deferred Exchange Spe­cial­ists & DST Advi­sor
NAMCOA® — Naples Asset Man­age­ment ~Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC

The title of this arti­cle is actu­al­ly a false state­ment. While there are tim­ing dead­lines in a §1031 exchange, the end of a cal­en­dar (or tax year) is not a dead­line.

So as a quick review, let’s look at the two key dead­lines with regard to a §1031 exchange. The dead­lines are from the date that you sell or close on your relin­quished prop­er­ty. The first is the dead­line to iden­ti­fy the poten­tial replace­ment prop­er­ty (prop­er­ties) that you may want to acquire. This dead­line is 45 days from the date that you closed on the relin­quished prop­er­ty. The sec­ond dead­line is 180 days. The 180 days occa­sion­al­ly gets con­fused as to when the 180 days starts. Is it from the end of your 45 days or is it 180 days from when you closed on the relin­quished prop­er­ty? Well, it’s 180 days from when you closed on the relin­quished prop­er­ty. And those are total days. There are no days off for hol­i­days, week­ends, your birth­day or any­thing else. Repeat­ed, 180 days from when you close on your relin­quished prop­er­ties. How­ev­er, there are sit­u­a­tions where you have less than 180 days to com­plete your exchange.

If the due date of your fed­er­al income tax return, which is typ­i­cal­ly April 15th, (plus a few days depend­ing on the year), is before 180 days then you have less than 180 days. In this case, the exchange is short­ened to the tax date that your fil­ing is due. There is always the oppor­tu­ni­ty to extend your date for fil­ing your tax­es. Typ­i­cal­ly, there’s an auto­mat­ic exten­sion until Octo­ber 15^th if you file for the exten­sion. This may come in handy in the event you are clos­ing near the end of the year or in the begin­ning of the year on your relin­quished prop­er­ty.

So, let’s take a look an exam­ple. Let’s say you sell your prop­er­ty this year and you close on it Decem­ber 15^th, 2025. Nor­mal­ly, your 180th day would be June 13th, 2026. But your tax return for 2025 is due April 15th, 2026. How­ev­er, unless you file an exten­sion, your exchange peri­od ends April 15th, 2026. You can enjoy a total of 180 days by fil­ing an auto­mat­ic exten­sion on your tax­es for cal­en­dar year 2025. Please con­sult your tax con­sul­tant or CPA to ensure you file the right form. Form 4868 is for indi­vid­u­als and Form 7004 would be for enti­ties.

There may be oth­er rea­sons why the IRS could extend or short­en the exchange dead­lines. These would be through spe­cial relief notices in the case of a dis­as­ter. We have seen this over the past few years with flood­ing in North Car­oli­na, hur­ri­canes in cer­tain parts of the coun­try and any oth­er dis­as­ter, such as the wild­fires in Cal­i­for­nia last year.

So as a quick sum­ma­ry, you have less than 180 days to com­plete a §1031 exchange when your tax return date is due with­out exten­sion that comes before the 180-day peri­od ends.

So, the ques­tion we get often is regard­ing any advan­tage of com­plet­ing your §1031 exchange in the same tax year as clos­ing on the relin­quished prop­er­ty? This is an excel­lent ques­tion, and occa­sion­al­ly investors may over­look this sit­u­a­tion. There may be prac­ti­cal or strate­gic advan­tages and maybe in some cas­es, dis­ad­van­tages of com­plet­ing a §1031 exchange in the same tax year as your relin­quished prop­er­ties. There is actu­al­ly no direct IRS ben­e­fit to com­plet­ing the 1031 exchange in the same year.

There are poten­tial advan­tages com­plet­ing the exchange in the same tax years. Let’s take a lit­tle deep­er analy­sis. Some CPAs would like for you to do this because it may sim­pli­fy their tax report­ing (if you hire some­one to do your tax­es). You would report the entire exchange on one tax return the same year as the sale. You only file Form 8828 which is a “like kind exchange” once con­vert­ing both the relin­quished and replace­ment prop­er­ty. The issue you would avoid would be fil­ing for an exten­sion and you could poten­tial­ly deal with a com­plet­ed exchange at tax times. For an exam­ple, if you sell a March of 2025 and you buy in July of 2025, all would be report­ed neat­ly on your 2025 returns. You as well as your CPA pro­fes­sion­al may enjoy not need­ing to file a tax return exten­sion.

If your exchange goes into the next tax year, you’ll often need to file an exten­sion to pre­serve the full 180 day. Com­plet­ing the exchange in the same tax year avoids that stepped entire­ly. Please con­sult the right form for fil­ing for indi­vid­u­als ver­sus enti­ties as pre­vi­ous­ly men­tioned. There may also be clear­er or clean­er account­ing and record keep­ing. Both trans­ac­tions would fall into the same account­ing year and this may make it eas­i­er for basis adjust­ments and prop­er­ty records. Book­ing for enti­ties such as LLC, part­ner­ship etc. may become eas­i­er as well as mak­ing depre­ci­a­tion sched­ules a lit­tle eas­i­er.

When the sale and pur­chase occur in dif­fer­ent years, it some­times rais­es flags or could cause mis­un­der­stand­ings. If your return does­n’t clear­ly show the full pic­ture of the exchange, there may be IRS scruti­ny and con­fu­sion. Keep­ing both in one year keeps things straight­for­ward.

There may be neu­tral points or poten­tial dis­ad­van­tages. The tim­ing does­n’t change your defer­ral, so there’s no extra tax ben­e­fit. As long as the exchange meets the IRS require­ment, it’s ful­ly taxed deferred when­ev­er it spans two tax years, not one. So, what about cash flow tim­ing? If you close your sale late in the year, you might pre­fer to push your replace­ment pur­chas­es in the next year to man­age cash flow or depre­ci­a­tion tim­ing. Why would you want to do that? Well, you may for exam­ple want to start depre­ci­a­tion lat­er or time to recog­ni­tion income dif­fer­ent­ly. There may also be time pres­sures for late sales in the end of the year Novem­ber or Decem­ber clos­ings. You have lim­it­ed time before tax sea­sons, poten­tial­ly forc­ing you to choose between com­plet­ing the exchange quick­ly or fil­ing exten­sion to keep the 180-day full win­dow open.

Here is a sum­ma­ry table.

What could the bot­tom line be? Well, poten­tial­ly fin­ish­ing your 1031 exchange in the same tax year is admin­is­tra­tive­ly sim­pler and offer­ing clean­er for report­ing. But remem­ber, there’s no tax rate or defer­ral advan­tage. If your trans­ac­tion tim­ing nat­u­ral­ly fits with­in one year, that’s great. How­ev­er, the word of cau­tion is it’s not worth forc­ing it for just that rea­son. Acquir­ing the cor­rect replace­ment prop­er­ty or prop­er­ties needs to be the pri­ma­ry focus of any 1031 exchange. Accred­it­ed investors who have com­plet­ed their due dili­gence on Delaware Statu­to­ry Trust (DST) and work with a advi­sor who is focused on DSTs may pro­vide for the quick deliv­ery or solu­tions to clos­ing on a replace­ment prop­er­ty.

As always con­tact us for more infor­ma­tion and a com­pli­men­ta­ry con­sul­ta­tion.

Alter­na­tive invest­ments and DSTs are not for all investors.  The acqui­si­tion of a cer­tain alter­na­tive invest­ments includ­ing DSTs is for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your §1031 Exchange and suit­ed for your invest­ment future. For more infor­ma­tion on how to prop­er­ly set up an IRC §1031Tax Deferred Exchange or if you are an accred­it­ed investor and would like addi­tion­al infor­ma­tion on a DST con­tact Al DiNi­co­la at 239–691-8098 or email adinicola@namcoa.com.

NAMCOA® is a SEC reg­is­tered invest­ment advi­so­ry firm that pro­vides com­pre­hen­sive port­fo­lio man­age­ment, finan­cial plan­ning, and fidu­cia­ry deci­sion-mak­ing ser­vices on behalf of retire­ment plan spon­sors. Our Dif­fer­ence is sum­ma­rized by our fidu­cia­ry approach which enables us to bet­ter meet port­fo­lio and retire­ment plan objec­tives, result­ing in stronger risk adjust­ed returns for investors and peace of mind for Clients. We also focus on alter­na­tive real estate invest­ment. Many real estate investors are seek­ing tax deferred solu­tions uti­liz­ing §1031 exchanges or Oppor­tu­ni­ty Zones.

This is not an offer to pur­chase or solic­i­ta­tion to pur­chase any secu­ri­ty, as such be made only through an offer­ing mem­o­ran­dum or prospec­tus.  Invest­ing in secu­ri­ties, real estate, or any invest­ment, whether pub­lic or pri­vate, involves risk, includ­ing but not lim­it­ed to the poten­tial of los­ing some or all of your invest­ment dol­lars when you invest in secu­ri­ties. You should review any planned finan­cial trans­ac­tions that may have tax or legal impli­ca­tions with your per­son­al tax or legal advi­sor.   NAMCOA, LLC is a Reg­is­tered Invest­ment Advi­sor, reg­u­lat­ed by SEC (Secu­ri­ties and Exchange Com­mis­sion). Our cor­po­rate office is locat­ed at 999 Van­der­bilt Beach Road, Suite 200, Naples Flori­da 34108. Secu­ri­ties Offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC. 5 Cen­ter­pointe Dri­ve, Ste. 400 Lake Oswego, OR, 97035MSC-BD, LLC and NAMCOA are inde­pen­dent­ly owned and are not affil­i­at­ed.

Thank you.