At the time when the relinquished property is transferred to the buyer, the taxpayer often does not yet know what property he or she wants to acquire. A deferred exchange is an exchange where the replacement property is closed on a date after the closing of the relinquished property.

There are strict time frames set forth by the IRS Code for the completion of a deferred exchange. The taxpayer has 45 days to identify the property he or she wants as replacement property, as well as still close all transactions within 180 days of the transfer of the relinquished property.