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.
Related solutions
1031 exchanges: in-depth articles
- He wanted his attorney of fifteen years to hold the money. That is the problem
- The boot was small. The penalty for not expecting it was not
- The hail came on day 103, three weeks before closing
- The loan was approved on day 55. On day 140 they asked for a new entity
- Three years is the wrong answer to how long you keep the file
- You sold two buildings six weeks apart. That may be one exchange or two
- Thirty years of improvements, and nobody kept the receipts
- The warehouse has been in the S corp since 1998. Getting it out is the problem
- The building is worth less than the loan, and you still owe tax on it
- The neighbor was right. Fourteen feet of your parking lot is his
- Eleven years left on the lease. The bankruptcy code says one
- The lawsuit arrived before the first rent check. It was about the parking lot
- No binder, no loan, no closing. The insurance quote that nearly killed an exchange
- If it burned down tonight, could you rebuild it? Often the answer is no
- Reinvest every dollar, the rule says. Then the roof fails in March
- You underwrote the seller's tax bill. Yours is going to be different
- The rent still arrives on the first. The store has been closed for a year
- The rent roll is the seller's opinion. The estoppel is the tenant's
- Changed your mind on day 31? You can still redo the whole list
- Spreading the gain instead of deferring it: the installment sale
- You exchanged into a building your own business rents. The income just changed character.
- The losses on your return that a 1031 exchange does not free
- The Phase I that comes back on day 38
- Selling the farm: sorting one sale into four different tax outcomes
- The settlement statement lines that quietly create a tax bill
- You moved out and rented your old house. What can you still exclude?
- Can you 1031 into a property overseas? The border rule that surprises people
- Held for investment, or held for sale? The line that decides your exchange
- One building, two tax breaks: splitting a duplex between Section 121 and a 1031
- Who holds the deed while you wait? Inside the parking arrangement
- Can you exchange into a building you already own part of? Usually no, with one real exception
- Boot netting: cash cures debt, but debt never cures cash
- Selling the hotel, the restaurant, the practice: only part of that price can be exchanged
- Two paragraphs in the contract: the cooperation clause nobody reads until it's missing
- You have to name the property before you finish inspecting it
- The 30-year rule: when a lease is treated like owning the land outright
- Your entire sale sits in a stranger's account. Here's how to make sure it's still there
- Mineral rights, water rights, easements: the real property you forgot you owned
- Your new building depreciates on two schedules, and only one of them is new
- Can you do a 1031 exchange inside a self-directed IRA? You almost certainly don't need to
- Whose name is on the deed? Vesting is the detail that quietly decides your exchange
- FIRPTA and the foreign seller: 15% of the price, gone before the exchange starts
- Your exchange isn't finished at closing: reporting it on Form 8824
- The state wants its cut at closing: withholding on out-of-state sellers
- Divorce and the 1031 exchange: untangling a property two people own
- What happens if you die in the middle of a 1031 exchange
- One into many, many into one: using a 1031 to reshape a portfolio
- When a 1031 fails: what actually happens, and the timing quirk that can save you
- The partial 1031 exchange: when taking some cash out is the right call
- Can you 1031 exchange raw land? The dirt qualifies, the intent decides
- Can you 1031 exchange an Airbnb? Yes, if it's a business and not a getaway
- What a 1031 exchange actually costs, and which fees quietly create a tax bill
- Turn a 1031 rental into your home: how deferred tax can become partly tax-free
- How long do you have to hold a 1031 property? The honest answer to the most-asked question
- The three identification rules: how many replacement properties can a 1031 name?
- Seller financing in a 1031 exchange: what happens to the carryback note
- The same-taxpayer rule: the small title change that quietly kills a 1031 exchange
- The 1031 isn't your last tax move: how cost segregation supercharges the replacement property
- The 1033 exchange: the tax break for when the choice to sell wasn't yours
- The 180-day clock, week by week: a closing playbook for your 1031 exchange
- Can you 1031 exchange a vacation home? Yes, but only if you clear this safe harbor
- What "like-kind" actually means, and five things people get wrong about it
- Building your replacement property with exchange dollars: the improvement 1031, explained
- Want cash out of your real estate without the tax? Refinance after the exchange, not before
- Keeping it in the family: the two-year rule that can unwind a related-party 1031 exchange
- When a 1031 exchange is the wrong move: five times we've told clients to just pay the tax
- Drop and swap: what happens when the partners want out in different directions
- Buy first, sell later: how a reverse 1031 exchange actually works
- California's clawback: how the state keeps taxing a property you already exchanged away
- Choosing a Qualified Intermediary: the decision that happens before your exchange even starts