1031 Exchange — Like-Kind Real Estate Swap
Defer capital gains tax on real estate by rolling proceeds into another investment property within strict timelines.
What it is
IRC §1031 lets you sell investment or business real estate and defer capital gains tax IF you reinvest proceeds into another 'like-kind' real estate of equal or greater value. Done repeatedly, you can defer indefinitely; at death, heirs get a step-up in basis and the deferred gain disappears.
The timelines (strict)
45 days from sale to IDENTIFY replacement property in writing; 180 days from sale to CLOSE. Funds must be held by a Qualified Intermediary — you can never touch them.
Common uses
Trade up from a single rental into a small multifamily; consolidate several small properties into a Delaware Statutory Trust (DST) for passive income; reposition from high-management properties into NNN leases.
Watch out for
- •No primary residences. Investment/business property only.
- •'Boot' (cash or debt relief) is taxable.
- •Post-2017 reform: only real estate qualifies — no equipment or vehicles.
Educational only — not tax, legal, or investment advice. Talk through your specific situation with a qualified advisor.