1031 Exchange Rules: Every Requirement in One Place

A 1031 exchange defers tax on the sale of real property when you trade it for other real property, both held for business or investment use, and you follow two clocks: identify replacement property within 45 days of the sale and receive it within 180 days or by your tax return due date (with extensions), whichever comes first (IRC §1031(a)). The rest of this page lists every requirement the statute and Treasury regulations impose, with links to the guides that go deeper.

Real property for real property

Since January 1, 2018, section 1031 applies only to real property. Equipment, vehicles, artwork and other personal property no longer qualify (Pub. L. 115-97 §13303). “Like-kind” is broad within real estate: land, apartments, retail, industrial and office buildings are all like-kind to each other. Two exceptions matter:

• US real property and foreign real property are not like-kind (§1031(h)).
• Real property held primarily for sale, such as a developer’s lots or a flipper’s inventory, is excluded (§1031(a)(2)).

Reg. §1.1031(a)-3 defines real property: land and improvements, unsevered natural products, water and air space, certain intangible interests such as leaseholds and easements, and property treated as real under state or local law. Our like-kind checker walks through it.

Interests in a partnership are not real property for this purpose. If an LLC taxed as a partnership owns the building, the LLC is the taxpayer that can exchange, not its members. See drop and swap.

Held for business or investment

Both the property you give up and the property you get must be held “for productive use in a trade or business or for investment.” The statute sets no minimum holding period. What counts is your purpose, and courts look at intent at the time of the exchange. A home you live in doesn’t qualify on its own, though a home that was partly a rental can combine §121 and §1031 (primary residence and 1031). Vacation homes have a specific safe harbor in Rev. Proc. 2008-16 (vacation homes).

The qualified intermediary and constructive receipt

If you receive the sale money, or could have taken it, the exchange becomes a sale. Reg. §1.1031(k)-1(f)(2) says you are in constructive receipt when money is “credited to the taxpayer’s account, set apart for the taxpayer, or otherwise made available” so you could draw on it. Money received by your agent counts as received by you.

The standard fix is the qualified intermediary safe harbor in Reg. §1.1031(k)-1(g)(4). A QI signs a written exchange agreement with you, takes an assignment of the sale and purchase contracts, and holds the cash. The conditions that matter most:

• The QI can’t be you or a “disqualified person.” That includes anyone who acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker in the 2 years before the sale ((k)(2)), plus related parties. Services on prior 1031 exchanges, and routine title, escrow or trust services, don’t count against a firm.
• The agreement must say you have no right to “receive, pledge, borrow, or otherwise obtain the benefits” of the money before the exchange period ends ((g)(6)). The exceptions are narrow: you can get the cash after day 45 if you identified nothing, after you’ve received everything you identified, or when a written contingency beyond your control occurs after day 45.
• The safe harbor ends the moment you have an unrestricted right to the funds ((g)(4)(vi)).

The IRS does not license or approve QIs. See choosing a qualified intermediary.

The 45-day and 180-day deadlines

Both periods start the day you transfer the relinquished property. If you sell several properties in one exchange, both run from the earliest transfer ((b)(2)(iii)).

Deadline	Rule	Source
Identification	Midnight of day 45	§1031(a)(3)(A); Reg. §1.1031(k)-1(b)(2)
Receipt of replacement property	Midnight of day 180, or the due date of your return for the year of the sale including extensions, if earlier	§1031(a)(3)(B)
Weekends and holidays	No extension. Count calendar days.	Reg. §1.1031(k)-1(b)(2)

The return-date cap matters for late-year sales. Sell on November 1 and day 180 is the end of April, two weeks past the April 15 due date for a calendar-year individual. Filing an extension (Form 4868) keeps the full 180 days. Federally declared disasters can extend both deadlines under Rev. Proc. 2018-58. The deadline calculator does the counting.

Identification rules: 3 property, 200%, 95%

The identification has to be in writing, signed by you, and delivered before day 45 ends to the seller of the replacement property or to another party to the exchange who isn’t a disqualified person, such as the QI or the title company ((c)(2)). Real property must be “unambiguously described,” by legal description, street address or a distinguishable name ((c)(3)). Property you close on within the 45 days counts as identified.

How many properties you can name ((c)(4)):

Rule	Limit
3-property rule	Any 3 properties, any value
200% rule	Any number, if their combined value at day 45 is no more than 200% of the value of what you sold
95% rule	If you exceed both, you must acquire at least 95% of the total value you identified

Go over both of the first two limits without meeting the 95% rule and you’re treated as having identified nothing. Revocations also have to be in writing, signed and delivered before day 45.

Same taxpayer on both sides

The taxpayer that sells has to be the taxpayer that buys. A single-member LLC that hasn’t elected corporate status is disregarded and treated as its owner (Reg. §301.7701-3(b)(1)), so you can sell in your own name and buy through your single-member LLC. A multi-member LLC is a separate taxpayer from its members.

Equal or up, in value and in debt

Section 1031(b) taxes gain to the extent you receive “money or other property.” Reg. §1.1031(d)-2 treats debt you’re relieved of as money received. The arithmetic that follows: to defer everything, the replacement generally has to cost at least what you sold for (net of exchange expenses), all net cash has to go into it, and any mortgage paid off has to be matched by new debt or by cash you add. Added cash can offset debt relief, but new debt can’t offset cash you take out. The details and a worked example are in boot in a 1031 exchange. Your replacement takes a carryover basis under §1031(d), so the deferred gain, including past depreciation, rides along (depreciation recapture).

Related parties

Exchanges with family members, or with entities you own more than 50% of, are allowed, but if either side disposes of its property within 2 years, the deferred gain comes back (§1031(f)). Buying replacement property from a related party through a QI fails when the related party ends up with cash (Rev. Rul. 2002-83). See related-party exchanges.

Other structures

• Buy first, sell later: reverse exchanges under Rev. Proc. 2000-37.
• Build on the replacement property: improvement exchanges.
• Fractional replacement property: DSTs under Rev. Rul. 2004-86.

Reporting on Form 8824

You file Form 8824 with your return for the year you transferred the relinquished property. It computes realized gain, recognized gain and the basis of the new property. For a related-party exchange, you also file it for each of the 2 following years. Recognized gain then flows to Form 4797 or Schedule D.

If the exchange fails but the QI held the cash into the next tax year, Reg. §1.1031(k)-1(j)(2) can let you report the gain in the year you receive it. See failed exchanges.

State rules

State income tax rules can add their own requirements, especially when you buy outside the state. California, for example, requires form FTB 3840 every year after you exchange California property for property elsewhere, until the deferred California gain is recognized (FTB 3840 instructions). Other states have their own withholding and clawback rules: state 1031 rules.

Have a question about a specific exchange, or need a loan on the replacement? Ask Janover Capital, which runs this site.

Sources

• 26 U.S.C. §1031
• Treas. Reg. §1.1031(k)-1, deferred exchanges
• Treas. Reg. §1.1031(a)-3, definition of real property
• Treas. Reg. §1.1031(d)-2, assumption of liabilities
• Treas. Reg. §301.7701-3, entity classification
• Rev. Rul. 2002-83 (IRB 2002-49)
• Rev. Proc. 2018-58 (IRB 2018-50)
• Instructions for Form 8824 (2025)
• FTB 3840 instructions