1031 Exchange

In depth

A 1031 exchange lets a real estate investor sell one investment property and acquire another like-kind property without immediately recognizing capital gains. Strict timelines apply: 45 days to identify replacement property and 180 days to close. A qualified intermediary must hold the proceeds. Misconception: 1031 is not available for primary residences or flipped properties held primarily for sale. Practically, in seller-financing scenarios, an installment sale and a 1031 do not mix easily; the seller cannot directly receive boot and exchange. However, structured properly with a qualified intermediary, a seller can roll part of the exchange into another property and seller-finance the boot, deferring gain on the exchanged portion and using installment sale treatment on the seller-financed portion. Always engage a qualified intermediary and CPA early.