What Is a 1031 Exchange?

Supporting Evidence

• The exchange must follow strict IRS timing rules, including identifying replacement property within 45 days and closing within 180 days.
• A qualified intermediary must hold the proceeds. Investors cannot simply receive the sale funds and decide later.
• Any cash or non-like-kind value taken out of the exchange can create taxable boot.

Why This Matters

A 1031 exchange can preserve capital for the next investment, but the deadlines are unforgiving. Financing, replacement property strategy, and escrow coordination all need to happen early.

Frequently Asked Questions

Can I use a 1031 exchange on my primary residence?

No. Section 1031 is generally for investment or business-use real estate, not the home you live in as your primary residence.

Do both properties have to be the exact same type?

No. Real estate is broadly considered like-kind for 1031 purposes, so many different types of investment property can qualify.

What happens if I miss the 45-day identification deadline?

Missing the identification deadline usually breaks the exchange and the sale becomes taxable.

Can I take some cash out in a 1031 exchange?

You can, but that portion may become taxable boot even if the rest of the exchange remains valid.