The direct answer
A section 1031 like-kind exchange can defer recognition of gain when qualifying real property held for business or investment is exchanged for qualifying like-kind real property and the statutory and regulatory requirements are met. For deferred exchanges, the IRS instructions include a 45-day written identification period and a 180-day receipt deadline, subject to the tax-return due-date rule.
Confirm that the property and purpose qualify
For exchanges after 2017, section 1031 generally applies to qualifying real property held for use in a trade or business or for investment, not property held primarily for sale. U.S. and foreign real property are not treated as like-kind to each other.
To apply the approach to an editable scenario, use the Rent vs Sell Calculator. For the neighboring question, explore Home Sale / Seller Net Proceeds Calculator.
Respect identification and completion deadlines
The replacement property in a deferred exchange must be identified in writing within the applicable 45-day period and received by the applicable 180-day or return-due-date deadline. Missing a deadline can prevent the intended deferral.
Understand that tax is deferred, not erased
Basis generally carries into replacement property under the exchange rules, so deferred gain can affect a later disposition. Cash or other non-like-kind property received can also create currently recognized gain.
Worked example
An investor selling one U.S. rental property and acquiring another through a properly structured deferred exchange may qualify for deferral if the properties, holding purpose, identification, timing and other requirements are satisfied. Simply reinvesting sale proceeds after closing is not enough by itself.
Common mistakes and limitations
Do not call every reinvestment a 1031 exchange. Structure, qualifying property, timing and reporting requirements matter.
Illustrative scenario comparison only; excludes income/capital-gains tax, time value of money unless an optional DCF mode is added, and changing debt balance unless entered by user.
Frequently asked questions
Is a 1031 exchange available for stocks or partnership interests?
Generally no. Current section 1031 treatment is focused on qualifying real property, with specific rules and exceptions.
What are the common deferred-exchange deadlines?
The IRS instructions describe a 45-day written identification period and a 180-day receipt deadline, subject to the return due-date rule.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Publication 544 (2025), Sales and Other Dispositions of AssetsGain or loss on disposition, depreciation-related gain treatment and like-kind exchange concepts for business and investment real estate.
- IRS — Instructions for Form 8824 (2025), Like-Kind ExchangesCurrent section 1031 real-property scope, 45-day identification and 180-day receipt timing, related-party and reporting rules.
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