1031 Exchange: The Complete Investor's Guide

Named for Section 1031 of the Internal Revenue Code, a 1031 exchange (also called a like-kind exchange) allows an investor to sell investment real estate and reinvest the proceeds into a new property of equal or greater value — deferring all federal capital gains tax and depreciation recapture.

The key word is deferred, not eliminated. Tax is rolled forward into the new asset, and can continue to be deferred indefinitely across successive exchanges. On a stepped-up basis at death, deferred gains can be eliminated entirely for heirs.

Two non-negotiable deadlines start on the day your relinquished property closes:

• 45 days to formally identify candidate replacement property in writing to your Qualified Intermediary.
• 180 days to close on one or more of the identified properties.

Both clocks run concurrently — the 45-day window is included inside the 180-day window. There are no extensions for weekends, holidays, financing delays, or seller issues. Miss either deadline and the exchange fails; the full capital gain becomes immediately taxable.

You must identify replacement candidates using one of three IRS rules:

• 3-Property Rule — identify up to three properties of any value. Most common.
• 200% Rule — identify any number of properties, as long as their combined fair-market value doesn't exceed 200% of the relinquished property's sale price.
• 95% Rule — identify any number of properties (no value cap), but you must close on at least 95% of their total value.

"Boot" is any non-like-kind value received in the exchange — most commonly cash, debt relief in excess of new debt, or personal property. Any boot received is immediately taxable as capital gain in the year of the exchange.

A Delaware Statutory Trust is an IRS-approved structure that qualifies as like-kind replacement property for 1031 purposes (Rev. Rul. 2004-86). Investors purchase fractional beneficial interests in institutional-grade real estate — fully passive, professionally managed.

DSTs are particularly useful when:

• You're up against the 45-day clock with no identified property.
• You want to retire from active landlording but defer the tax bill.
• You need to precisely match a replacement amount to avoid boot.
• You want institutional diversification you can't access directly.

98 Doors works alongside your Qualified Intermediary, CPA, and attorney to identify and close replacement positions inside the 45/180-day windows. Our team has structured exchanges into direct equity, syndications, and DSTs across Florida, the Outer Banks, Nashville, and Peru.

If you're inside a live exchange window — or planning a sale that will trigger one — book a call. We move quickly.

This page is for educational purposes only and does not constitute tax or legal advice. Consult a qualified CPA and attorney before initiating a 1031 exchange.