In 1984, the IRC was modified to add the requirement that a like-kind exchange be done "nearly simultaneously" to receive nonrecognition treatment. Nonrecognition treatment does not apply to an exchange of property unless the property received by the taxpayer is identified within 45 days of the transfer of the property relinquished by the taxpayer. Also, the property must be received by the taxpayer within 180 days of the transfer of the relinquished property, or by the due date (including extensions) of the transferor’s tax return for the year in which the transfer of the relinquished property occurs, whichever is earlier. This provision was enacted to curb the practice of deferred exchanges, often called "Starker" exchanges, in which a taxpayer would transfer property to a purchaser who would promise to purchase an as yet unidentified property in the future, at the taxpayer’s direction, for transfer to the taxpayer.
Read my other articles on 1031 Like-Kind Exchanges.
