When Can I Get My Money Back?

posted on October 23, 2025

Starting an Exchange Late in the Year?

Have you ever wondered “If I choose not to complete my 1031 Exchange, when can I get my money back?” This is a good question and one that a Qualified Intermediary (“QI”) occasionally hears from clients. When you are doing an exchange, it is important to understand that federal tax regulations limit your rights to receive, pledge, borrow, or otherwise obtain the benefits of the money held by the intermediary during the exchange period. Once your relinquished property has closed and First American Exchange is holding the exchange proceeds, these rules permit us to use the funds to acquire replacement property and to release any remaining funds as follows:

• If you have not identified replacement property during the 45-day identification period, you may receive the funds as of the 46th day.
• If you have identified replacement property, you may receive the funds as of the sooner of (a) the date that you acquire all replacement property that you have identified and (b) the end of the 180 day exchange period. In other words, if you identify more than one property but you don’t acquire all of them, we must retain the balance of the funds until the 181st day.
• Another condition may permit you to get control of the exchange funds before the 181st day, but it is very limited. The regulations say that if a material and substantial contingency occurs that relates to the exchange, is provided for in writing and is beyond the control of the investor and any disqualified person other than the seller, then the funds may be delivered to the investor before the 181st day. Although this regulation appears to give you more leeway, the IRS has ruled otherwise. The IRS has stated that a “material and substantial contingency” occurs when the event is truly out of the control of the investor, such as where the property is destroyed in a fire or condemned, or where a zoning change request which was a condition of acquiring the property was denied, or something substantially similar. These are very limited reasons which may permit us to release the funds early.