A 1031 exchange can affect the order and timing of a commercial property sale and purchase. Bring your tax adviser, attorney, and exchange intermediary into the discussion before committing to a transaction structure.
Start with the IRS requirements
Section 1031 applies to qualifying exchanges of real property held for business or investment. For a deferred exchange, the IRS generally requires identification of replacement property within 45 days of transferring the relinquished property, and receipt within 180 days or the applicable tax-return due date, including extensions, if earlier.
These are eligibility and timing rules, not a conclusion that a particular sale qualifies. The IRS instructions for Form 8824 explain the requirements. The IRS also discusses restrictions on receiving proceeds and intermediary safe harbors in its exchange FAQ.
Prepare the questions before listing
- How is the current property held, and how will replacement property be held?
- What gain, debt, cash, and transaction costs should the tax adviser evaluate?
- Who will document the exchange and control the proceeds?
- What identification process and written deadlines apply?
- What happens if a replacement property fails inspection or financing?
Keep property diligence separate
A deadline does not answer whether the replacement property is sound. Read the leases, examine the physical condition, confirm financing, and understand upcoming capital costs. Maintain a property review checklist alongside the exchange calendar so the tax process does not swallow the investment decision.
Your next conversation
Take the sale contract, ownership information, basis records, debt details, and candidate replacement properties to your advisers. Ask for a written responsibility list and calendar. This page is an introduction, not tax or legal advice for your circumstances.