How-to / IRC § 1031
How to Execute a 1031 Like-Kind Exchange
Defer capital gains tax on the sale of investment real estate by reinvesting through a Qualified Intermediary. Miss a deadline and the deferral collapses — here's the six-step playbook.
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Financial Freedom Librarian
Fiduciary Research Editor
J.D., LL.M. (Taxation) — supervising fiduciary review
Last updated
View all sources →Step 1
Engage a Qualified Intermediary before closing
The QI must be in place BEFORE you close on the relinquished property. You cannot touch the proceeds — constructive receipt blows the exchange.
Verify this step
Step 2
Sell the relinquished property
Proceeds wire directly to the QI's escrow account. Closing documents must reference the § 1031 exchange and assign rights to the QI.
Verify this step
Step 3
Identify replacement property within 45 days
Deliver a written, signed identification notice to the QI within 45 days of closing. Use the 3-property rule, 200% rule, or 95% rule.
Verify this step
Step 4
Close on replacement property within 180 days
The QI wires escrowed funds to close the replacement purchase. Total elapsed time from relinquished sale closing cannot exceed 180 days (or tax filing deadline, whichever is earlier).
Verify this step
Step 5
Match value, equity, and debt to avoid boot
Replacement property value, equity invested, and debt assumed must each meet or exceed the relinquished property — any shortfall is taxable boot.
Verify this step
Step 6
Report on Form 8824 and archive evidence
File Form 8824 with the year's return showing the deferred gain. Archive the QI agreement, identification notice, and closing statements; anchor the bundle on Stellar.
Verify this step
Statutes & authorities
- IRC § 1031 — Exchange of real property held for productive use or investment
- Treas. Reg. § 1.1031(k)-1 — Deferred exchanges
- Rev. Proc. 2000-37 — Reverse exchanges
- IRS Form 8824 — Like-Kind Exchanges