Guides
How a 1031 exchange works
Plain-language explanations of the rules that govern an exchange, written for owners of investment and business real estate and the professionals who advise them. Each guide cites the Code and regulations it relies on.
The guides describe the general rules. They are not tax or legal advice, and whether an exchange fits your situation is a question for your tax advisor and attorney.
-
What a 1031 exchange is
The rule, who it is for, what it defers, and the sequence of a deferred exchange from sale to purchase.
-
The 45-day and 180-day deadlines
How the two periods are counted, why they run at the same time, the tax-return due date, and disaster relief.
-
The identification rules
The three-property, 200 percent and 95 percent rules, what a valid identification looks like, and how to revoke one.
-
What a qualified intermediary does
The safe harbor, the assignment of contracts, who is disqualified from acting, and the restrictions on exchange funds.
-
Boot: cash, debt relief and the equity rule
Why taking cash or reducing debt makes part of an exchange taxable, and how partial exchanges are taxed.
-
Depreciation recapture in an exchange
The 25 percent tax on prior depreciation, how an exchange defers it, and how basis carries over.
-
LLCs, partnerships and disregarded entities
The same-taxpayer requirement, single-member LLCs, partners who want different outcomes, and drop-and-swap.
-
Reverse and improvement exchanges
Buying before selling under Revenue Procedure 2000-37, the exchange accommodation titleholder, and building on replacement property.
-
What happens if an exchange fails
Missed deadlines, when the funds can be returned, and how a failure straddling two tax years is reported.
-
The exchange checklist
What must happen before the sale closes, during the 45 days, at the replacement closing, and at tax time.