Thinking about using a 1031 exchange with an Orange County property? The clock starts the day you close your sale, and it moves fast. You want clear steps so you can identify and close on your next property without risking a tax bill. This guide breaks down the deadlines, local OC factors, and smart options if timing gets tight. Let’s dive in.
The two deadlines you cannot miss
- Identify within 45 days. You must identify your replacement property in writing within 45 calendar days after you transfer the relinquished property. The identification must be signed and delivered to a party involved in the exchange, often your Qualified Intermediary. See IRS Publication 544.
- Close within 180 days. You must receive the replacement property by the earlier of 180 days after the sale or your federal tax return due date for that year, including extensions. The 45 days are part of the 180 days, they run at the same time. See IRS Form 8824 instructions.
If you do not meet the 45 or 180 day deadlines, the exchange usually fails and your sale proceeds are taxable in the year of sale. IRS Publication 544 explains the consequences.
How the clock works
- Calendar days, not business days. Weekends and holidays count. There are no routine extensions. IRS guidance confirms this.
- Tax return due date can shorten 180 days. If your return is due before day 180, you must file an extension or close earlier. See the Form 8824 instructions.
- Disaster relief is rare. The IRS may postpone deadlines only for certain declared disasters, and only as stated in specific notices. Do not plan on relief. See IRS disaster guidance.
What counts as identified
Your identification must be in writing, signed, and delivered by day 45. Use a street address or legal description so the property is clearly recognizable. If you actually close on a replacement during the 45 days, that property counts as identified automatically. See the Form 8824 instructions.
Identification rules you can use
- Three property rule. Identify up to three properties, any value. IRS Publication 544
- 200% rule. Identify any number of properties as long as the total value does not exceed 200% of what you sold. IRS Publication 544
- 95% rule. If you identify more than allowed under the first two rules, you must acquire at least 95% of the total value you identified. This is high risk and used less often. IRS Publication 544
Incidental personal property that is typical in a real estate deal and worth 15% or less of the larger item is disregarded for identification. IRS Publication 544
Timelines across common exchange structures
- Deferred exchange. This is the standard path. You sell first, the Qualified Intermediary holds your proceeds, then you buy. The same 45 and 180 day rules apply. See IRS Publication 544
- Reverse exchange. You need to buy first and sell second. An Exchange Accommodation Titleholder can hold title temporarily. The same 45 and 180 day windows apply, measured from the first transfer in the structure. Plan this before you move. Primer on reverse mechanics
- Improvement exchange. You can use exchange funds to improve the replacement property within a qualified arrangement. These deals are procedural and must be documented carefully. See IRS guidance on QEAAs
- DSTs and TICs. Certain Delaware Statutory Trusts and Tenants in Common structures can qualify as replacement property and can close quickly, which helps when time is tight. These are passive, fractional interests, and they come with sponsor rules and exit considerations. See Revenue Ruling 2004-86
Orange County market pressure on timing
Orange County often has low inventory and strong competition, which can make it harder to identify and close within your windows. Many OC exchangers prepare a short list with backups well before day 45 and keep a fast-close option ready, such as a DST. Review local data to gauge competition, like the Orange County Association of REALTORS market updates.
California and OC paperwork to plan for
- California conformity. California generally follows the federal 1031 rules for real property after the TCJA change. You may need to report the exchange to the state, such as with FTB Form 3840. See FTB’s page on reporting like-kind exchanges
- OC Assessor steps. A recorded deed usually triggers a Preliminary Change of Ownership Report or similar filing. Expect possible supplemental assessments after closing. A federal 1031 exchange defers income tax, but it does not stop county property tax processes. Coordinate with your escrow and the Assessor’s office. See OC Assessor guidance
- Prop 19 is separate. Proposition 19 rules for primary residences and parent or child transfers are separate from 1031 rules for real property. If your situation involves a residence and an exchange, get both income tax and property tax advice. Learn more at the OC Assessor site
A simple 1031 timeline for OC sellers
- Before listing: Hire a Qualified Intermediary, loop in your tax advisor, build a shortlist of replacement options in OC and nearby markets.
- Day 0: Close the sale. Your QI receives the funds in a qualified escrow or trust.
- Days 1 to 30: Tour and underwrite options. Line up a fast-close backup such as a DST or TIC if needed.
- By Day 45: Deliver your signed identification list to the QI. Use the three property rule or 200% rule.
- Days 46 to 150: Complete due diligence, secure financing, and keep backup options active.
- By Day 180 or earlier tax return due date: Close on one or more identified properties.
Common pitfalls and quick tips
- Waiting to shop until after closing can cost you the 45 day window. Start early.
- Assuming business days can push you past a deadline. The IRS counts calendar days. See Publication 544
- Expecting an extension is risky. Disaster relief is limited and rare. IRS disaster rules
- Missing state or county filings can trigger surprises. Coordinate FTB reporting and OC Assessor forms. FTB reporting and OC Assessor PCOR/COS steps
- Related party exchanges have special limits and follow-up reporting. Get tax counsel early. See Form 8824 instructions
Work with the right team
- Qualified Intermediary. A QI keeps you from having constructive receipt of funds and manages the exchange flow using a qualified trust or escrow. Confirm independence and financial strength. See IRS safe harbors in Publication 544 and a primer on disqualified persons and independence tests here.
- Local agent, escrow, and tax advisor. In a competitive OC market, coordination helps you hit day 45 and day 180, manage supplemental assessments, and keep backup options ready.
When you are ready to plan your sale and map your 1031 exchange timeline in Orange County, reach out to Mike Doyle Real Estate for local guidance and a coordinated plan.
FAQs
When does the 45 day clock start in a 1031 exchange?
- It starts on the date you transfer the relinquished property, and both the 45 and 180 day periods run at the same time as calendar days. IRS Publication 544
Can I get extra time if I miss a 1031 deadline?
- No routine extensions are available. Only specific IRS disaster relief or very narrow safe harbors may apply. IRS disaster guidance
If I identify three properties in a 1031, do I have to buy all three?
- No. Under the three property rule you can acquire any one or more of the identified properties within the 180 day period. IRS Publication 544
Can I use a DST as my 1031 replacement property?
- Yes. Certain Delaware Statutory Trust interests can qualify and often close quickly, which can help with deadlines. Review sponsor terms and exits. Revenue Ruling 2004-86
Does a 1031 exchange stop property tax reassessment in Orange County?
- No. A 1031 defers federal income tax but county property tax processes continue. Expect PCOR or COS filings and possible supplemental assessments. OC Assessor guidance
