In the event a taxpayer is unable to find a party with who to have a like kind exchange because the party whose property the taxpayer seeks wants to sell for cash instead of doing a trade. A three party exchange is basically a way for the taxpayer to still carry out a like kind exchange but with three instead of two people.
Finding Third Party
If the taxpayer can find a purchaser who is willing to pay cash and arrange a triangular exchange, the taxpayer can create a tax free exchange and a cash sale can be obtained by the party who holds the desired property. Generally, a transaction will be a nontaxable exchange to the taxpayer if the taxpayer intends to and does exchange the property, and does not receive or have control over the cash that flows to the seller.
There is a 45 day deadline on identifying the substitute like kind property and a 180 day deadline on receipt of the exchange property after the taxpayer transfers the property relinquished in the exchange.
These deadlines are generally not negotiable and will be under scrutiny by the IRS if any issues arise with the transaction.