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What Happens If I Cannot Find A Replacement Property In Time?

If you cannot find a replacement property in time for your 1031 exchange, there are several consequences that you should be aware of.

First and foremost, if you do not identify a replacement property within the 45-day identification period or acquire the replacement property within the 180-day exchange period, your 1031 exchange will fail. This means that you will be liable for paying capital gains taxes on the sale of your relinquished property.

Additionally, any funds that were held in your qualified intermediary account will be returned to you, and you will lose the tax-deferred benefits that a 1031 exchange provides.

It is important to note that the IRS does not provide extensions for these deadlines, so it is crucial to plan ahead and work with a qualified intermediary and real estate professionals to identify and acquire a suitable replacement property within the required time frames. You may, however, be extended by up to 120 days if you qualifiy for a disaster extension under Rev. Proc. 2007-56.

If you are unable to find a replacement property in time, you may want to consider other tax-deferred investment options or consult with a tax professional to explore your options.