Tax
1031 Exchange (Like-Kind Exchange)
A tax-deferral mechanism letting real-estate investors swap one investment property for another without recognizing capital gain.
Under IRC §1031, investors can exchange one investment or business real-estate property for another 'like-kind' property and defer capital gains tax indefinitely. Strict timing rules apply: 45 days to identify replacement property and 180 days to close.
Personal residences don't qualify. Since 2018, only real estate qualifies (equipment, art, and the like no longer qualify).
Requires a Qualified Intermediary to hold the proceeds between sale and purchase; the seller never touches the cash.
Common pitfalls
- Missing the 45-day identification or 180-day closing windows; both are absolute
- Trying to do the exchange without a Qualified Intermediary; the IRS treats it as a taxable sale
- Buying 'down' (replacement property worth less than property sold) without recognizing the difference as gain
Related service
See tax and CPA servicesRelated terms
Have a 1031 Exchange (Like-Kind Exchange) situation in your business?
Federal, state, and local returns prepared and reviewed by a licensed CPA, with the planning done before year-end rather than after it.