In a 1031 exchange, the clock is unforgiving. From the day you sell your relinquished property, you have just 45 days to identify your replacement property in writing, and 180 days total to close. The 45-day identification window is widely regarded as the hardest part of the exchange: finding, vetting, and committing to suitable replacement real estate in six weeks — while competing with other buyers and risking that a deal falls through — is a real source of failed exchanges. Delaware Statutory Trusts (DSTs) help solve this problem because they are pre-packaged: the sponsor has already acquired, financed, and offered the property, so a DST can be identified and closed quickly, even late in the window. DSTs also make excellent backup identifications if your primary deal collapses. This guide explains why the 45-day window is so tight, why DSTs identify quickly, how to use them as backups, how to apply the identification rules, and how to coordinate with your qualified intermediary. Note that DST interests are securities offered to accredited investors after a suitability review, and Baker 1031 does not provide tax or legal advice — verify the current rules with your advisors.
The 45-Day Pressure Problem
The 45-day identification window is the single tightest constraint in a 1031 exchange, and it is where many exchanges fail. The rule is strict: within 45 calendar days of selling your relinquished property, you must identify your replacement property in writing, delivered to your qualified intermediary. The clock starts on the closing of your sale, runs on calendar days (weekends and holidays included), and cannot be extended for ordinary reasons. Miss it, and your exchange collapses — the proceeds become taxable, and you owe the capital-gains tax you were trying to defer.
The pressure comes from how much must happen in those six weeks. You have to find suitable replacement real estate, perform enough due diligence to commit, negotiate or secure it, and often arrange financing — all while competing with other buyers in the open market. If your first-choice property falls through after you have identified it, you may have little time left to find an alternative. Traditional replacement property is slow: deals can take months to close, and a seller who delays or backs out can blow up your exchange. So the 45-day window forces investors to make a high-stakes commitment quickly, with limited room for error and no margin for a deal that does not come together.
So the 45-day window is a hard, unextendable deadline whose pressure causes failed exchanges when replacement property is slow or falls through. Understanding the problem frames why DSTs help. The 45-day pressure problem — the strict requirement to identify replacement property in writing within 45 calendar days of selling, on an unextendable clock, while finding, vetting, and committing to suitable real estate in a competitive market and risking that a deal falls through — is the leading cause of failed 1031 exchanges. It leaves little margin for error. Understanding the problem frames why pre-packaged DSTs are valuable. The 45-day identification window is the tightest, unextendable deadline in a 1031 exchange, and it causes failures when replacement property is slow to close or falls through.
Why DSTs Identify Quickly
DSTs are uniquely suited to the 45-day window because they are pre-packaged. By the time a DST is offered, the sponsor has already acquired the property, arranged the financing (including any non-recourse debt), completed the legal structuring, and prepared the offering documents. There is no negotiation with a seller, no race to lock up a property, and no separate loan application — the work that makes traditional replacement property slow has already been done. You are buying into a finished, available offering rather than assembling a deal yourself.
This means a DST can be identified and closed quickly, even late in the window. Once you decide a DST is suitable, the subscription process is relatively fast: you complete the paperwork, your equity is invested, and the exchange can close well inside the 180-day limit — sometimes in a matter of days. Because the property already exists and is fully structured, there is far less that can go wrong between identification and closing than with an open-market purchase. That reliability is a major reason 1031 investors turn to DSTs when time is short: a DST is available on demand, in known amounts, with known terms. So a DST removes most of the execution risk that makes the 45-day window so stressful.
So DSTs identify quickly because they are pre-acquired, pre-financed, and pre-structured — available on demand with little that can fall through. Understanding why explains their role under deadline pressure. Why DSTs identify quickly — because the sponsor has already acquired the property, arranged financing, completed the legal structuring, and prepared the offering, so an investor buys into a finished, available offering with a fast subscription process and little execution risk between identification and closing — makes them a reliable answer to the 45-day window. They are available on demand with known terms. Understanding this explains their value under deadline pressure. DSTs identify and close quickly because they are pre-packaged — pre-acquired, pre-financed, and pre-structured — leaving little that can fall through inside the 45-day window.
A DST is replacement property that already exists, fully financed and structured — so when the 45-day clock is running down, it is something you can actually count on closing.
Using DSTs as Backup Identifications
One of the most valuable ways to use a DST is as a backup identification. The identification rules let you identify more than one replacement property within the 45-day window, and a smart strategy is to identify your primary target — say, an open-market property you are negotiating — alongside one or more DSTs as fallbacks. If your primary deal closes, you simply proceed with it. If it falls through, you already have a suitable, pre-packaged DST identified and ready to close, so your exchange is protected rather than lost.
This backup approach directly addresses the biggest risk of the 45-day window: that your chosen property collapses after you have identified it, leaving you no time to find an alternative. Because a DST is available on demand and closes quickly, it is the ideal safety net — you can pivot to it late in the process and still close within the 180-day window. Many experienced 1031 investors and advisors build this redundancy in deliberately, treating an identified DST as insurance against execution risk. The key is to identify the DST within the 45-day window (you cannot add it later) and to respect the identification rules that limit how many properties you can name. So a DST backup turns a fragile exchange into a resilient one.
So using DSTs as backup identifications protects an exchange against a primary deal falling through, since a pre-packaged DST can be closed on demand within the window. Understanding this strategy is one of the most practical uses of DSTs. Using DSTs as backup identifications — naming a primary target alongside one or more DSTs as fallbacks within the 45-day window, so that if the primary deal collapses the investor can pivot to a pre-packaged DST and still close in time — directly mitigates the biggest 45-day risk: a deal falling through with no time to replace it. The DST acts as insurance. Understanding this is among the most practical DST uses. Identifying a DST as a backup within the 45-day window protects an exchange, letting an investor close on a pre-packaged DST if the primary deal falls through.
Applying the Identification Rules
When you identify replacement property — including DSTs — you must follow one of three identification rules, and choosing the right one shapes how many properties you can name. The three-property rule lets you identify up to three properties of any value, regardless of their total price; this is the most common choice and is usually sufficient when you are naming a primary property plus a DST or two as backups. The 200% rule lets you identify any number of properties, as long as their combined value does not exceed 200% of the value of your relinquished property — useful when you want to diversify across several DSTs.
The third option, the 95% rule, lets you identify any number of properties of any value but requires you to actually acquire at least 95% of the total value you identified — a high bar that is rarely used and risky if any identified property fails to close. For most 1031 investors using DSTs, the three-property rule or the 200% rule is the practical choice. Identifications must be unambiguous and in writing, signed and delivered to your qualified intermediary by midnight of the 45th day. For a DST, the identification should clearly describe the specific offering. So applying the right identification rule lets you name your primary property and your DST backups correctly without violating the limits.
So applying the identification rules — three-property, 200%, or 95% — governs how many properties (including DSTs) you can identify, with the first two being the practical choices for most exchanges. Understanding the rules keeps your identification valid. Applying the identification rules — the three-property rule (up to three properties of any value), the 200% rule (any number, total value capped at 200% of the relinquished property), and the rarely used 95% rule (any number, but you must acquire 95% of the identified value) — determines how many replacement properties, including DST backups, you can name within the 45-day window. The first two suit most exchanges. Understanding the rules keeps the identification valid. The three identification rules — three-property, 200%, and 95% — limit how many properties (including DSTs) you can identify, with the three-property and 200% rules being the practical choices.
- The 45-day window is the tightest, unextendable deadline in a 1031 exchange and a leading cause of failed exchanges.
- DSTs identify and close quickly because they are pre-packaged — already acquired, financed, and structured.
- Identifying a DST as a backup protects your exchange if your primary deal falls through, letting you still close in time.
- Identifications must follow the three-property, 200%, or 95% rule and be in writing to your QI by the 45th day.
Coordinating With Your QI
Your qualified intermediary (QI) is central to a valid identification, and coordinating with them early is essential. The QI holds your sale proceeds (you cannot touch them without disqualifying the exchange) and is the party to whom your written identification must be delivered. The identification must be signed and received by the QI by midnight of the 45th day — not postmarked, but actually delivered — so you need to know your QI's process, deadlines, and accepted delivery methods well before the clock runs out. A late or improperly delivered identification can invalidate the entire exchange.
Good coordination means engaging your QI before you even sell, so the exchange is set up correctly from the start, and then working with them to prepare your identification document as the 45-day deadline approaches. If you are identifying DSTs, the QI needs the specific offering details to record the identification properly. Because DSTs close quickly, your QI can also help orchestrate the timing so that funds move smoothly from the trust account to the DST subscription within the 180-day window. So your QI is both the custodian of your funds and the recipient of your identification — coordinating closely with them keeps your exchange compliant and your DST identifications valid.
So coordinating with your QI ensures your written identification is delivered correctly and on time and that funds move properly into your DSTs within the deadlines. Understanding the QI's role completes the picture. Coordinating with your QI — engaging the qualified intermediary before the sale, understanding their process and delivery deadlines, delivering a signed, unambiguous written identification (including specific DST details) by midnight of the 45th day, and orchestrating the smooth movement of funds into the DST subscription within 180 days — is essential to a valid exchange. The QI is both fund custodian and identification recipient. Understanding the QI's role completes the picture. Coordinate early with your QI, who holds your proceeds and must receive your signed written identification by the 45th day, to keep your DST identifications valid and your exchange compliant.
The identification only counts if your qualified intermediary actually has it in writing by midnight of day 45 — so know your QI's process before the clock starts, not after.
Putting a 45-Day DST Plan Together
Bringing the pieces together produces a practical playbook for using DSTs to survive the 45-day window. Before you sell, engage a qualified intermediary and start lining up potential DST offerings, so you are not starting from zero when the clock begins. As soon as your relinquished property closes, the 45-day clock starts, so move quickly: shortlist suitable DSTs, complete your due diligence and suitability review, and decide which identification rule you will use.
Then identify deliberately. If you have a primary open-market property, name it and add one or more DSTs as backups under the three-property or 200% rule; if you are going all-in on DSTs, identify the specific offerings you intend to acquire (potentially diversifying across several). Deliver the signed, written identification to your QI before the 45th day. If your primary deal holds, close it; if it falls through, pivot to your identified DST and close it inside the 180-day window. Because DST interests are securities, you will work through a broker-dealer and complete a suitability review before subscribing. So a disciplined plan — QI engaged early, DSTs pre-shortlisted, identification made correctly, backups in place — turns the 45-day window from a threat into a manageable process.
So putting a 45-day DST plan together means engaging your QI early, shortlisting DSTs, identifying primary and backup properties under the right rule, and closing on time. Understanding the playbook makes the deadline manageable. Putting a 45-day DST plan together — engaging a QI before the sale, pre-shortlisting suitable DSTs, performing due diligence and the suitability review quickly once the clock starts, identifying a primary property plus DST backups (or DSTs directly) under the three-property or 200% rule, delivering the written identification to the QI by day 45, and pivoting to an identified DST if the primary deal falls through — converts the 45-day window into a controlled process. Preparation is everything. Understanding the playbook makes the deadline manageable. A disciplined plan with the QI engaged early, DSTs pre-shortlisted, and backups identified turns the 45-day window into a manageable process rather than a threat.
How Baker 1031 Helps You Meet the 45-Day Deadline
Baker 1031 Investments helps 1031 investors meet the 45-day identification deadline — explaining why the window is so tight, why pre-packaged DSTs identify and close quickly, how to use DSTs as backup identifications, how to apply the three-property, 200%, and 95% rules, and how to coordinate with your qualified intermediary — so you can protect your exchange against the leading cause of failure: running out of time.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review under Regulation D. When time is short, we help you move quickly: shortlisting suitable DST offerings, completing due diligence and the suitability review efficiently, and identifying DSTs as primary or backup replacement property within the window. We coordinate with your qualified intermediary on the written identification and the movement of funds, and with your CPA and attorney on the tax and legal specifics — Baker 1031 does not provide tax or legal advice. Because DSTs are pre-acquired, pre-financed, and pre-structured, they let you close inside the 180-day limit with confidence, and identifying them as backups protects you if a primary deal collapses. Distributions and returns are never promised; DST interests are non-promissory and carry risk. Our role is to help you use DSTs to meet the 45-day deadline and complete a compliant, suitable exchange.
Frequently Asked Questions
What is the 45-day identification window in a 1031 exchange?
The 45-day identification window is the period during which you must identify your replacement property in a 1031 exchange. From the day you close on the sale of your relinquished property, you have exactly 45 calendar days to identify, in writing, the replacement property (or properties) you intend to acquire, with that identification delivered to your qualified intermediary. The clock runs on calendar days — weekends and holidays included — and the deadline is strict and unextendable for ordinary reasons. If you fail to identify suitable replacement property within 45 days, your exchange fails, your sale proceeds become taxable, and you owe the capital-gains tax you were trying to defer. The 45-day window is widely regarded as the hardest part of a 1031 exchange because finding and committing to suitable replacement real estate in just six weeks is genuinely difficult. So the 45-day window is the tightest, most consequential deadline in the exchange — and the reason many investors turn to pre-packaged DSTs, which can be identified and closed quickly when time is short.
Why is the 45-day window so difficult?
The 45-day window is difficult because a great deal must happen in a short, unextendable period. Within six weeks of selling your property, you have to find suitable replacement real estate, perform enough due diligence to commit, negotiate or secure it, and often arrange financing — all while competing with other buyers in the open market. The clock runs on calendar days and cannot be extended for ordinary reasons, so there is no margin if a deal moves slowly. Worse, if your first-choice property falls through after you have identified it, you may have little or no time left to find an alternative, and a seller who delays or backs out can blow up your entire exchange. Traditional replacement property is slow — deals can take months to close — which clashes with the tight deadline. So the 45-day window forces high-stakes commitments quickly, with limited room for error. This is precisely why DSTs, which are pre-packaged and close fast, are so valuable for investors racing against the clock.
Why can DSTs be identified and closed so quickly?
DSTs can be identified and closed quickly because they are pre-packaged. By the time a DST is offered to investors, the sponsor has already acquired the property, arranged the financing (including any non-recourse debt), completed the legal structuring, and prepared the offering documents. There is no negotiation with a seller, no race to lock up a property, and no separate loan application — the slow, uncertain work of assembling a real estate deal is already done. You are buying into a finished, available offering rather than building a transaction yourself. Once you decide a DST is suitable and complete the subscription paperwork, your equity is invested and the exchange can close in a matter of days, well inside the 180-day limit. Because the property already exists and is fully structured, there is far less that can go wrong between identification and closing than with an open-market purchase. So DSTs are available on demand, in known amounts and with known terms — which is exactly why they are reliable when the 45-day clock is running down.
Can I use a DST as a backup if my primary deal falls through?
Yes — using a DST as a backup identification is one of the smartest ways to protect a 1031 exchange. The identification rules let you identify more than one replacement property within the 45-day window, so you can name your primary target (say, an open-market property you are negotiating) alongside one or more DSTs as fallbacks. If your primary deal closes, you proceed with it. If it falls through, you already have a suitable, pre-packaged DST identified and ready to close, so your exchange is protected rather than lost. This directly addresses the biggest 45-day risk: a chosen property collapsing after identification with no time to find an alternative. Because a DST is available on demand and closes quickly, you can pivot to it late in the process and still close within the 180-day window. The key is to identify the DST within the 45-day window — you cannot add it later — and to respect the identification rules limiting how many properties you can name. So an identified DST acts as insurance against execution risk, turning a fragile exchange into a resilient one.
What are the three identification rules?
The three identification rules govern how many replacement properties you can identify in a 1031 exchange. The three-property rule lets you identify up to three properties of any value, regardless of their total price — this is the most common choice and usually sufficient when naming a primary property plus a DST or two as backups. The 200% rule lets you identify any number of properties, as long as their combined value does not exceed 200% of the value of your relinquished property — useful when you want to diversify across several DSTs. The 95% rule lets you identify any number of properties of any value, but requires you to actually acquire at least 95% of the total value you identified — a high bar that is rarely used and risky if any identified property fails to close. For most 1031 investors using DSTs, the three-property rule or the 200% rule is the practical choice. Whichever you use, the identification must be unambiguous, in writing, signed, and delivered to your qualified intermediary by the 45th day. So pick the rule that fits how many properties you need to name.
Which identification rule should I use with DSTs?
For most investors using DSTs, the three-property rule or the 200% rule is the practical choice. The three-property rule — letting you identify up to three properties of any value — is usually sufficient when you are naming a primary open-market property plus one or two DSTs as backups, or when you want to acquire just a few DSTs. If you intend to diversify your exchange across several DSTs (more than three), the 200% rule is better, because it lets you identify any number of properties as long as their combined value stays within 200% of your relinquished property's value. The 95% rule is rarely used with DSTs because it requires acquiring 95% of everything you identify, which is unnecessarily risky. The right rule depends on your strategy: a few targets with backups suits the three-property rule, while broader diversification across many DSTs suits the 200% rule. So choose based on how many DSTs (and other properties) you want to identify, and confirm the values stay within the chosen rule's limits. Your qualified intermediary and advisor can help you structure the identification correctly.
What is the role of the qualified intermediary in identification?
The qualified intermediary (QI) is central to a valid identification. The QI holds your sale proceeds — you cannot take possession of them without disqualifying the exchange — and is the party to whom your written identification must be delivered. The identification has to be signed and actually received by the QI by midnight of the 45th day; it is not enough to postmark it or decide internally, it must be in the QI's hands. A late or improperly delivered identification can invalidate the entire exchange. Beyond receiving the identification, the QI helps orchestrate the movement of funds from the trust account into your replacement property — including a DST subscription — within the 180-day window. This is why coordinating with your QI early matters: you need to know their process, deadlines, and accepted delivery methods before the clock runs out, and you should engage them before you even sell so the exchange is set up correctly. So the QI is both the custodian of your funds and the recipient of your identification, making close coordination essential to a compliant exchange.
When does the 45-day clock start?
The 45-day clock starts on the day you close the sale of your relinquished property — that is, the date the transfer of your old property is completed. From that date, you have exactly 45 calendar days to deliver your written identification of replacement property to your qualified intermediary. The count includes weekends and holidays; there is no pausing for non-business days. Importantly, the 180-day window for actually closing on your replacement property runs concurrently from the same starting date, not from the end of the 45-day period — so the 45-day and 180-day clocks both begin when you sell. This means you do not get 45 days plus another 180; you get 45 days to identify and 180 days total to close, both measured from the sale. The deadlines are strict and generally cannot be extended except in narrow circumstances like federally declared disasters. So know your exact sale-closing date, mark day 45 and day 180 on the calendar immediately, and work backward to ensure your identification and closing both happen in time. DSTs help because they close fast within these windows.
What happens if I miss the 45-day deadline?
If you miss the 45-day identification deadline, your 1031 exchange fails. Without a valid, timely written identification delivered to your qualified intermediary, you cannot acquire replacement property within the exchange, so the sale of your relinquished property is treated as a fully taxable sale. The proceeds the QI is holding are released to you, and you owe the capital-gains tax (and any depreciation recapture) that you were trying to defer. There is generally no grace period or extension for ordinary reasons — the deadline is strict and runs on calendar days. The only common exceptions are narrow, such as relief granted after a federally declared disaster. This is exactly why the 45-day window is so high-stakes and why investors build in protection: identifying a pre-packaged DST as a backup ensures you have a suitable, ready-to-close property identified before the deadline, so a primary deal falling through does not cost you the exchange. So missing the deadline means losing your deferral entirely — making careful planning, early QI coordination, and DST backups essential safeguards against a costly failure.
Can I identify multiple DSTs in one exchange?
Yes — you can identify multiple DSTs in a single 1031 exchange, subject to the identification rules. Under the three-property rule, you can identify up to three properties of any value, which could be three DSTs (or a mix of DSTs and other property). If you want to identify more than three DSTs — to diversify across asset classes, geographies, or sponsors — you would use the 200% rule, which lets you identify any number of properties as long as their combined value does not exceed 200% of your relinquished property's value. Identifying multiple DSTs is a common diversification strategy: because DST minimums are relatively low, you can split one exchange across several DSTs to spread your risk rather than concentrating in a single replacement property. Each DST must be clearly and unambiguously described in your written identification to the qualified intermediary, delivered by the 45th day. So yes, multiple DSTs are allowed and often advisable for diversification — just choose the identification rule that accommodates how many you want to name and keep within its limits.
How quickly can a DST actually close?
A DST can close very quickly — often within days of your decision to invest, and almost always well inside the 180-day window. Because the DST is pre-packaged, with the property already acquired, financed, and structured, there is no lengthy escrow, seller negotiation, or loan underwriting to complete. Once you have decided a DST is suitable, performed your due diligence, and the suitability review is done, the closing essentially involves completing the subscription paperwork and having your qualified intermediary transfer your exchange funds to the DST. This can happen in a matter of days, which is why DSTs are so valuable when the 45-day clock has run down or a primary deal has just collapsed. By contrast, an open-market property purchase can take weeks or months to close, with many points of potential failure. The speed and reliability of a DST closing is one of its biggest practical advantages in a time-pressured exchange. So if you need to close fast — especially late in the exchange timeline — a DST is typically the most dependable option. Confirm the specific subscription process with your advisor.
Do I still need due diligence if a DST closes quickly?
Yes — speed of closing does not replace the need for due diligence. Even though a DST is pre-packaged and can close fast, you should still evaluate the offering carefully: the sponsor's track record, the property and its market, the lease structure, the debt terms, the fees, the projected (not guaranteed) distributions, and the risks. The convenience of a quick close is about execution, not about skipping analysis. Because DST interests are securities, you will also go through a suitability review with your broker-dealer, which assesses whether the offering fits your financial situation, goals, and risk tolerance. The good news is that DST due diligence can be performed efficiently, because the offering documents are already prepared and the property is already acquired — so you can do thorough analysis within the 45-day window. The key is to start early: shortlist suitable DSTs before or right after your sale, so you have time to evaluate them properly. So always do your due diligence, even on a fast-closing DST — just plan to do it efficiently within the exchange timeline. Quick closing is a benefit, not a license to skip diligence.
Can the 45-day or 180-day deadlines ever be extended?
The 45-day and 180-day deadlines are strict and generally cannot be extended for ordinary reasons — not for a deal falling through, financing trouble, or simply needing more time. They run on calendar days from your sale closing and are firm. The principal exception is relief granted by the IRS in connection with a federally declared disaster: when the IRS issues disaster relief, it may postpone 1031 deadlines for affected taxpayers in the designated area, sometimes by a meaningful number of days. These extensions are not automatic for every situation — they apply only when the IRS specifically grants relief and you qualify under its terms. Outside of such relief, you should plan as if the deadlines are immovable, because they almost always are. This is why building in protection — early QI coordination, pre-shortlisted DSTs, and DST backup identifications — matters so much: you cannot rely on getting more time. So treat the 45-day and 180-day deadlines as fixed, verify the current rules with your tax advisor, and structure your exchange to comply without depending on an extension.
How should I prepare for the 45-day window before I sell?
The best preparation for the 45-day window happens before you sell. First, engage a qualified intermediary and set up the exchange correctly, since you cannot take possession of the sale proceeds without disqualifying it. Second, start lining up potential replacement property in advance — including shortlisting suitable DST offerings — so you are not starting from zero when the clock begins. Third, understand the identification rules (three-property, 200%, and 95%) and decide roughly how you will identify: a primary property with DST backups, or a set of DSTs directly. Fourth, get your financial and accreditation information ready, since DSTs require a suitability review. Doing this groundwork before the sale means that when the 45-day clock starts, you can move quickly to evaluate, identify, and close. Because DSTs are pre-packaged and close fast, having a few suitable ones shortlisted gives you a reliable path to completing the exchange even if an open-market deal falls through. So preparation — QI engaged, DSTs shortlisted, rules understood, paperwork ready — is what turns the 45-day window from a threat into a manageable process. Start before you sell.
How does Baker 1031 help me meet the 45-day deadline?
We help 1031 investors meet the 45-day identification deadline — explaining why the window is so tight, why pre-packaged DSTs identify and close quickly, how to use DSTs as backup identifications, how to apply the three-property, 200%, and 95% rules, and how to coordinate with your qualified intermediary — so you can protect your exchange against the leading cause of failure: running out of time. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review under Regulation D. When time is short, we help you move quickly: shortlisting suitable DST offerings, completing due diligence and the suitability review efficiently, and identifying DSTs as primary or backup replacement property within the window. We coordinate with your qualified intermediary on the written identification and the movement of funds, and with your CPA and attorney on the tax and legal specifics — Baker 1031 does not provide tax or legal advice. Distributions and returns are never promised; DST interests are non-promissory and carry risk. Our role is to help you use DSTs to meet the 45-day deadline and complete a compliant, suitable exchange.
Glossary
- 45-Day Identification Window
- The period to identify replacement property in writing after a sale.
- 180-Day Window
- The total time to close on replacement property in a 1031 exchange.
- Delaware Statutory Trust (DST)
- A trust holding real estate in which investors own fractional interests.
- Qualified Intermediary (QI)
- The party that holds exchange proceeds and receives the identification.
- Three-Property Rule
- Identify up to three properties of any value.
- 200% Rule
- Identify any number of properties up to 200% of relinquished value.
- 95% Rule
- Identify any number but acquire 95% of the identified value.
- Backup Identification
- A fallback property identified in case the primary deal fails.
- Relinquished Property
- The property you sell to begin a 1031 exchange.
- Replacement Property
- The like-kind property you acquire to complete the exchange.
- Pre-Packaged Offering
- A DST already acquired, financed, and structured by a sponsor.
- Written Identification
- The signed, unambiguous notice naming replacement property.
- Boot
- Taxable value received when equity or debt is not fully replaced.
- Suitability Review
- Confirming a DST offering fits the investor before investing.
- Accredited Investor
- An investor meeting income or net-worth thresholds for Reg D offerings.
- Revenue Ruling 2004-86
- The IRS ruling making DST interests 1031-eligible like-kind property.
Sources & References
- Cornell Legal Information Institute. 26 CFR § 1.1031(k)-1 — Treatment of deferred exchanges
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trust as replacement property)
- Cornell Legal Information Institute. 26 U.S. Code § 1031 — Exchange of real property held for productive use or investment
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
