The Section 1031 exchange procedure is one that should be entered into with a certain amount of planning and foresight; the process presents the incautious property investor with ample opportunity to make a misstep. Keeping this in mind, you may be somewhat skittish about beginning the 1031 exchange process without a certainty that you will be able to follow the process to completion. In all actuality, however, the risks involved in an exchange are not as intimidating as they may, at first, appear.

Beginning the 1031 process isn't in any way a total commitment - as a matter of fact, many of the smartest real estate investors who are selling an investment property will begin the process of a 1031 exchange just to leave the option of exchanging open. This is because, if an investor begins on the path of a exchange, there exist several chances to back out and simply sell the property, while starting out along the path of selling outright removes altogether the option of a 1031 tax exchange.

There is actually no reason to worry about the possibility of having a change of heart during the course of an exchange. The only thing you actually need to do in order to keep your options open is stay attentive to the time frames involved in the process of an exchange, as they'll be the major determining factor of when you will get the chance to receive the proceeds that would've been transferred to your replacement property had you gone through with the exchange.

After closing on the sale of your relinquished property, the proceeds of the sale are sent straight to your chosen intermediary. Once this has occurred, the earliest point at which you can take back your proceeds from your qualified intermediary is after a period of 45 days, which represents the deadline for having identified a suitable replacement property. If 45 days come and go without your having made an identification, the exchange will end and you will be able to receive your proceeds. If you have made an identification prior to deciding that you would like to terminate the exchange, you can just revoke the identification before the end of the 45 day period, and the result will be the same.

If you're past this step in the process, the next chance you will get to retrieve your proceeds will be one-hundred-eighty days from the end of the 45 day period, which is the deadline for closing on the purchase of a replacement property. However, if your federal income tax return occurs during the one-hundred-eighty days, you may shorten this waiting period. As long as you do not ask for an extension on your return, you may, at this point, tell your qualified intermediary that the exchange has been terminated and receive your proceeds.

At the end of the day, it is always a good idea to be prepared for whatever contingencies may arise; beginning the 1031 process when you aren't sure what will happen in the future can, in fact, be a good way to keep all of your options available. Provided that you stay aware of the time frames involved in the 1031 process, you can have the freedom to change your mind regarding your exchange in the event that there is a change in your circumstances.