EZ1031 EXCHANGE

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What is a Delayed Exchange?

A 1031 exchange where the purchase of the replacement property can take place up to 180 days from the sale of the relinquished property. Also called a Starker exchange.

Also called non-simultaneous, deferred and Starker. A delayed exchange is when the Replacement Property is received after the transfer of the Relinquished Property. All potential Replacement Properties must be identified within 45 days from the transfer of the Relinquished Property and the Exchanger must receive all Replacement Properties within 180 days or the due date of the Exchanger's tax return, whichever comes first.

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This is the most common tax deferred strategy available to investors. There is a time delay between the sale of the relinquished property and the purchase of the replacement property. Because of the landmark 1979 federal case entitled, Starker v US 602 F2d 1341 (9th Cir 1979) wherein the court substantiated the validity of the delayed exchange process. Before this case, 1031 of the Internal Revenue Code promulgaged in 1924 authorized tax-free exchanges of real and personal property. The 1984 Tax Reform Act adopted subsection 1031(a)(3) which created the 45 day identification period and the 180 day exchange period. It was in 1991 when the IRS promulgated the final regulations under 1.1031(a)-1 and this provided the specific rules for deferred like kind exchanges.

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