What Is a 1031 Exchange?

A 1031 exchange allows you to sell an investment or business property and purchase another qualifying property without paying capital gains tax at the time of sale. The tax is deferred, not eliminated, allowing your money to remain invested.

Why Consider a 1031 Exchange?

• Defer capital gains tax and depreciation recapture
• Keep more capital working for you
• Upgrade or diversify your real estate investments
• Improve cash flow or location

What Properties Qualify?

✔Investment or business property
✔Rental to rental, rental to commercial, commercial to rental
✗Personal residences, vacation homes for personal use, fix and flip properties

Critical IRS Deadlines

• 45 days from sale: Identify replacement properties in writing
• 180 days from sale: Complete the purchase

These deadlines are strict and cannot be extended.

Qualified Intermediary Requirement

Sale proceeds must be held by a qualified intermediary. If you receive or control the funds, the exchange is disqualified.

Reinvestment Rules

To fully defer tax, you must purchase property of equal or greater value, reinvest all net proceeds, and replace equal or greater debt (or add cash).

What Happens to the Tax?

The deferred tax carries forward into the new property and is triggered only if the property is later sold without another 1031 exchange.

This overview is for informational purposes only.