1031 Exchange Guidance
Defer capital gains tax, keep 100% of your equity compounding, and reinvest into property you actually want to own — all within the rules and the clock.
What is a 1031 exchange?
A 1031 exchange (named for Section 1031 of the Internal Revenue Code) lets you defer capital gains taxwhen you sell an investment property, as long as you reinvest the proceeds into "like-kind" replacement property of equal or greater value within strict deadlines.
Instead of losing a third or more of your equity to federal capital gains, depreciation recapture, net investment income tax, and state taxes, a properly executed exchange keeps the full amount working for you. Done repeatedly over a lifetime, it can compound into a dramatically larger estate : and, with proper planning, the deferred tax may be eliminated entirely for your heirs through a step-up in basis.
The strategy is powerful but unforgiving. Miss a deadline or take receipt of the cash, and the entire gain becomes taxable. That's where disciplined, fiduciary guidance earns its place.
Key takeaways
- Defer 100% of capital gains tax by reinvesting all proceeds and replacing debt
- Identify replacement property within 45 days; close within 180 days
- A qualified intermediary must hold the proceeds. You can't touch them
- Like-kind is broad: trade an apartment for retail, land, or a DST interest
- "Swap till you drop", heirs may receive a stepped-up basis
The four phases of a successful exchange.
Every exchange runs on the same backbone. Our job is to manage each phase so nothing slips.
Sell the relinquished property
At closing, your qualified intermediary (QI) receives the proceeds, not you. Taking constructive receipt of even a dollar can disqualify the exchange. The 45- and 180-day clocks begin on this date.
Identify replacement property (45 days)
Within 45 calendar days you must formally identify candidate replacement properties in writing, following the 3-property rule, 200% rule, or 95% rule. We help you build a list with real fallbacks, not a single fragile target.
Close on replacement (180 days)
You must acquire the replacement property within 180 days of the sale. To fully defer tax, you reinvest all net proceeds and take on equal or greater debt. We coordinate the close alongside your QI, CPA, and attorney.
Report & plan ahead
Your CPA reports the exchange on IRS Form 8824. We stay engaged for the next move (whether that's another exchange, a DST, or a 721 UPREIT) so your strategy keeps compounding.
The three identification rules.
Within your 45-day window, your identification must satisfy one of three IRS rules. Choosing the right one (and lining up genuine options) is where most exchanges are won or lost.
DST interests are especially useful here: they can serve as a pre-vetted backup identification, protecting your exchange if a primary target falls through.
How DSTs de-risk your 45 days →| Rule | What it allows |
|---|---|
| 3-Property Rule | Identify up to three properties of any value, the most common choice. |
| 200% Rule | Identify any number of properties, provided their combined value doesn't exceed 200% of the sold property's value. |
| 95% Rule | Identify any number of properties of any value, but you must acquire at least 95% of the total identified value. |
A 1031 exchange may be a fit if you…
Face a large tax bill
You're selling appreciated investment property and want to defer capital gains, depreciation recapture, and NIIT.
Want to reposition
You'd like to trade up, consolidate scattered holdings, or move equity into a stronger market or asset class.
Are tired of managing
You want out of active management but not out of real estate, a DST or 721 UPREIT can be your replacement.
1031 exchange FAQ
What are the 45-day and 180-day rules?
After your sale closes, you have 45 calendar days to formally identify replacement property and 180 calendar days to close on it. The clocks run concurrently from the sale's closing date — and there are no extensions for weekends or holidays.
What qualifies as "like-kind" property?
For real estate, like-kind is interpreted broadly. Almost any real property held for investment or business use qualifies — you can exchange an apartment building for a retail center, raw land, an industrial building, or a fractional DST interest.
Do I really need a qualified intermediary?
Yes. To preserve deferral you cannot take "constructive receipt" of the proceeds. A qualified intermediary (QI) holds the funds between transactions and facilitates the exchange. We coordinate directly with your QI from day one.
What is "boot" and why does it matter?
Boot is any non-like-kind value you receive — cash left over or a reduction in debt. Boot is taxable. To fully defer, you must reinvest all net proceeds and replace your debt with equal or greater debt (or additional cash).
Can I exchange into a passive investment?
Yes — a Delaware Statutory Trust (DST) interest qualifies as like-kind replacement property, letting you stay invested in institutional real estate without active management. Learn more about DSTs
On the clock? Let's move.
If you've sold (or are about to) every day inside the 45-day window counts. Tell us where you stand and we'll respond within one business day.