1031 exchange basics
A like kind exchange lets some investors defer certain taxes by swapping investment property. Here are the common terms to discuss with your tax pro and intermediary.
Core parts
- Qualified intermediary Holds funds between sale and purchase and manages documents.
- Identification rules Typical windows include a set number of days to identify, and a set number of days to close.
- Like kind Real property held for investment or business use exchanged for similar real property.
Order of operations
- Engage an intermediary before closing the sale of your relinquished property.
- Identify replacement properties in writing within the allowed window.
- Close on the replacement property within the final deadline.
Practical notes
- Talk to your tax professional early to confirm if an exchange aligns with your goals.
- Loan timing, appraisals, and inspections can be tight; choose an experienced team.
- Repairs and credits should be structured so they do not disrupt exchange rules.