Key takeaways
- Since 2018, Section 1031 applies only to real property. U.S. real estate is like-kind to other U.S. real estate.
- You have 45 days from the sale to identify replacement property in writing, and 180 days (or your tax return due date with extensions, if earlier) to close.
- You can't touch the proceeds. A qualified intermediary holds them, and your own real estate agent, accountant, or attorney from the past two years can't serve in that role.
- Cash or other non-like-kind property you receive (boot) is taxable to the extent of gain.
What qualifies
According to the IRS, Section 1031 now applies only to exchanges of real property, effective for exchanges after 2017. Machinery, equipment, vehicles, and other personal or intangible property no longer qualify.
Real properties are generally like-kind to each other, even if they differ in grade or quality. A warehouse can be exchanged for a retail center or land. Real property in the United States is not like-kind to real property outside the United States.
Both the property sold and the property bought must be held for productive use in a trade or business or for investment. A primary residence does not qualify.
The two deadlines
| Day | Event | Rule |
|---|---|---|
| Day 0 | Relinquished property closes | The qualified intermediary holds the proceeds. You never receive them. |
| Day 45 | Identification deadline | Identify potential replacement property in writing, delivered to someone involved in the exchange such as the qualified intermediary. |
| Day 180 or tax return due date | Exchange must close | Receive the replacement property by the 180th day or the due date (with extensions) of your tax return for the year of the sale, whichever is earlier. |
The deadlines run on calendar days and don't stop for weekends or holidays. A December sale can run into the April tax filing date before day 180. File an extension if needed.
How many properties you can identify
The Treasury regulations (26 CFR 1.1031(k)-1) allow you to identify replacement property under one of three rules:
- Three-property rule: up to three properties of any value.
- 200% rule: any number of properties, as long as their combined value doesn't exceed 200% of the value of the property you sold.
- 95% rule: any number, if you actually acquire at least 95% of the total value identified.
Most exchanges use the three-property rule. Identify backups. Deals fall apart during due diligence, and the 45-day window doesn't reset.
Qualified intermediaries and boot
If you receive the sale proceeds, even briefly, the exchange can fail. The IRS describes using a qualified intermediary or exchange facilitator to hold the proceeds until the exchange is complete. You can't act as your own intermediary, and neither can your agent, including a real estate agent, accountant, or attorney who worked for you within the previous two years.
If you receive cash or other property that isn't like-kind, you recognize gain to the extent of that "boot." To defer all gain, buy replacement property of equal or greater value and reinvest all net proceeds. Replacing debt matters too: taking on less debt than you paid off can create taxable boot.
Report the exchange on IRS Form 8824 with your tax return for the year the exchange occurred.
The practical risk: buying the wrong property on a deadline
The rules are clear. The pressure isn't. A 45-day clock pushes investors toward whatever is available, at whatever price. Start the replacement search before the sale closes, set acquisition criteria in writing, and underwrite the replacement as hard as you would any purchase.
I help clients define criteria, find replacement candidates, and evaluate them. The exchange structure and deadlines belong with a qualified intermediary and your tax and legal advisors.
Common questions
What is the 45-day rule in a 1031 exchange?
You must identify potential replacement property in writing within 45 days of selling the relinquished property. The identification goes to someone involved in the exchange, such as the qualified intermediary.
What is the 180-day rule?
The replacement property must be received by the 180th day after the sale or the due date (with extensions) of your tax return for the year of the sale, whichever is earlier.
Can I do a 1031 exchange with equipment or business assets?
Not since 2018. Section 1031 now applies only to real property.
Can my real estate agent hold the money?
No. Your agent, including a real estate agent, accountant, or attorney who worked for you in the previous two years, cannot serve as your qualified intermediary.
Sources
- IRS, Like-kind exchanges: real estate tax tips
- IRS, Like-kind exchanges under IRC Section 1031 (fact sheet)
- 26 CFR 1.1031(k)-1, Treatment of deferred exchanges
Sources retrieved October 2, 2026.
General information, not legal, tax, accounting, or investment advice. This is general information about federal rules. It is not tax or legal advice. Work with a qualified intermediary and your own tax and legal advisors. Examples marked illustrative use hypothetical numbers.