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Dont Lose Your Full 180 Day Exchange Period File a Tax Extension If Your 1031 Sale Closes Late in the Year

If you're completing a 1031 exchange and your relinquished property is set to close between October 17 and December 31, 2025, it's critical to understand that your standard 180-day exchange period may be shortened—unless you take the right steps.

Why Your Exchange Period Could Be Cut Short

Under Treasury Regulation §1.1031(k)-1(b)(ii), the 180-day exchange period ends on the earlier of:

  1. 180 days from the date the relinquished property is transferred, or
  2. The due date of your tax return, including extensions, for the year in which the relinquished property is sold.

This means that if your relinquished property closes late in the year, the typical April 15 tax deadline could cut your exchange period short—unless you file for an extension.

Real-World Example

Let’s say Mr. Smith sells Greenacre Farm on December 11, 2025, as part of a 1031 exchange. The 180th day following that sale would be June 9, 2026. However, Mr. Smith’s tax return is due on April 15, 2026, which falls before the 180-day mark.

Unless Mr. Smith files for an extension, his exchange period will end prematurely on April 15, 2026, not June 9. By filing for an extension, Mr. Smith preserves his right to use the full 180 days to complete the exchange.

What You Should Do

If your relinquished property is closing between October 17 and December 31, 2025, and you’re participating in a 1031 exchange:

  • Mark your calendar: The anticipated tax deadline for 2025 is April 15, 2026.
  • File for a tax extension before that date to preserve your full 180-day exchange period.
  • Consult your tax or legal advisor to make sure all steps are taken correctly.

For more information about filing for an extension, visit the IRS website:
https://www.irs.gov/taxtopics/tc304.html

Reminder: Tax rules surrounding 1031 exchanges are complex. Always consult your tax or legal advisor to understand how these rules apply to your specific situation.


Source from Julie Bratton

Vice President | Old Republic Exchange Company

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About The Smith Team

Ken Smith, a Maui resident for 45 years, brings his extensive local knowledge and passion for the island to his successful real estate career. Alongside his daughter-in-law, Melissa Smith, and Greg Smith, the Smith Team provides a wealth of experience and dedication to clients seeking to buy or sell property in Maui.

Melissa Smith, a third-generation Maui native, combines her deep understanding of the island's growth with a commitment to exceptional service. She empowers clients with knowledge to make informed decisions in finding their dream homes. With a background as a top agent and a Broker's license, Melissa's expertise is invaluable.

Gregory P. Smith, a lifelong Maui surfer, channels his passion for the island and its natural beauty into his real estate profession. His enthusiasm, deep market knowledge, and dedication to exceeding client expectations make him an exceptional agent.

The Smith Team's combined local expertise, commitment to client service, and understanding of the unique Maui real estate market make them an ideal choice for those looking to navigate the island's property landscape. Their proven track record ensures a smooth and successful experience for both buyers and sellers.