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OVERVIEW
What is a 1031 Exchange?
Property owners seeking to sell appreciated real estate generally will incur capital gains. One way to delay payment of capital gains taxes is to reinvest the proceeds into another property under the rules of section 1031 of the tax code (commonly known as a 1031 exchange).
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1031 Exchange: Maximizing Your Investment
A full walkthrough of how a 1031 exchange works — the tax-deferral mechanics, the deadlines and rules that most often trip investors up, and how a DST can complete an exchange for investors who'd rather not manage a replacement property directly.
GENERAL RULES
What Governs a 1031 Exchange?
Like-Kind Property
The proceeds from the sale of your real estate must be exchanged for other real estate — for example, multifamily assets for an office property, or vice versa. Primary residences and other property held strictly for personal use don't qualify.
Qualified Intermediary Required
A Qualified Intermediary (QI) must hold the sale proceeds and is responsible for releasing the funds to purchase the replacement property.
45 & 180-Day Deadlines
An investor has 45 calendar days to identify a replacement property and 180 days total to close escrow. Both countdowns run from the sale date and include weekends and holidays.
Equal or Greater Value
The replacement property must be of equal or greater value, with all equity reinvested, to qualify for a full capital gains tax deferral. Any proceeds not reinvested will incur capital gains taxes.
Matching Title
The newly acquired property must be titled in the exact same manner as the relinquished property.
Boot Is Taxable
Any cash or non-like-kind property received in the exchange — commonly called "boot" — is taxable, even if the rest of the transaction otherwise qualifies for deferral.
Three-Property Rule
Identify up to three potential replacement properties. You may acquire one, two or all three of them, so long as the combined purchase prices are equal to, or of greater value, than the relinquished property.
200% Rule
Allows you to identify more than three potential replacement properties if their value does not exceed 200% of the value of the property sold.
95% Rule
Allows you to identify more than three replacement properties with a total value that can be more than 200% of the value of the relinquished property, but only if the investor acquires at least 95% of the value of the properties they identified.
IDENTIFYING AN EXCHANGE PROPERTY
Three Ways to Identify Replacement Property
Once you sell the relinquished property, you have 45 calendar days to identify potential replacement properties. There are three rules used to determine which and how many properties may be identified.
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1031 Exchanges & Estate Planning
How pairing a 1031 exchange with the step-up in basis at death can defer capital gains during your lifetime and potentially eliminate them for your heirs — including the current 2026 estate tax landscape and how DSTs can simplify inheritance across multiple heirs.
Schedule a Consultation
Have a question about our process, our properties, or how a 1031 exchange or DST could fit your portfolio? Our team is here to help.
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