01
PRE-FLIGHTBefore closing
Confirm the transaction belongs in the 1031 conversation.
Start with the property and the taxpayer—not the deadline. Section 1031 generally applies to qualifying real property held for investment or productive use in a trade or business, not real property held primarily for sale.
WHAT HAPPENSReview how the relinquished property is held, how it has been used, who owns it and what the investor expects to acquire next.
WHO ENTERS THE STORYCPA or tax counsel · real-estate attorney · broker · owner/investor
WATCH FORTreating every real-estate sale as exchange-eligible, changing ownership too late, or waiting until closing day to ask structural questions.
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02
ASSEMBLEBefore transfer
Build the exchange team before the money moves.
A conventional deferred exchange is usually coordinated before the relinquished property closes. A qualified intermediary is commonly used so the taxpayer does not simply receive unrestricted sale proceeds and later attempt to reinvest them.
WHAT HAPPENSSelect the QI, align the CPA/tax advisor and attorney, brief the broker and lender, and make sure exchange documents and closing instructions are coordinated.
WHO ENTERS THE STORYQualified intermediary · CPA/tax advisor · attorney · broker · lender/title
WATCH FORReceiving or controlling sale proceeds, incomplete exchange documents, or discovering financing and title constraints after the clock starts.
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03
TRANSFERDay 0
Transfer the relinquished property. The federal clock starts.
The transfer date of the property given up starts the identification period and exchange period for a deferred exchange. This is the date your 45-day identification window is measured from.
WHAT HAPPENSThe relinquished property transfers, the closing statement is finalized and exchange proceeds are handled under the exchange structure rather than paid directly to the taxpayer.
WHO ENTERS THE STORYQI · closing/title/escrow · attorney · broker · CPA/tax advisor
WATCH FORUsing the wrong start date, overlooking multiple-property timing issues, or assuming the exchange deadlines pause for weekends and holidays.
MAKE THE CLOCK REALEnter a transfer date.
See the standard Day 45 and Day 180 markers while you read the process.
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04
IDENTIFYDays 1–45
Identify replacement property in writing.
For a deferred exchange, replacement property generally must be identified within 45 days after the relinquished property is transferred. The IRS instructions require a signed written identification that describes the replacement property clearly and is delivered in the manner required by the rules.
WHAT HAPPENSResearch candidate properties, underwrite them, coordinate financing and send a compliant written identification before the identification period ends.
WHO ENTERS THE STORYInvestor · QI · broker · lender · CPA/tax advisor · attorney
WATCH FORMissing the deadline, relying on an informal list, identifying too many properties without satisfying the applicable limitation, or using vague descriptions.
IDENTIFICATION RULE LABHow multiple-property identification is commonly framed
3Three-property ruleIdentify up to three replacement properties regardless of fair market value.
200%200% ruleIdentify any number if their aggregate fair market value does not exceed 200% of the relinquished property value.
95%95% ruleA narrow alternative can apply when more property is identified, if the value actually received satisfies the 95% threshold.
These are federal identification concepts summarized from IRS guidance. Application to a specific exchange should be confirmed with qualified tax/legal professionals and the QI.
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05
SELECTInside the exchange period
Underwrite the replacement property as an investment—not merely as a deadline solution.
“Like kind” for qualifying real property is broader than “same asset class.” But tax compatibility is only one layer. Location, leases, cash flow, debt, capital expenditures, management intensity, concentration risk and exit strategy still deserve normal investment diligence.
WHAT HAPPENSCompare identified options, test financing, inspect the asset, review title and contracts, and determine which property fits the investor’s objectives and exchange plan.
WHO ENTERS THE STORYInvestor · broker · lender · attorney · inspectors/consultants · CPA/tax advisor
WATCH FORBuying a weak asset simply to beat the clock, confusing market desirability with tax qualification, or ignoring debt/equity and ownership-structure implications.
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06
EXECUTEBefore replacement closing
Coordinate diligence, debt, title and closing mechanics.
The tax timeline does not replace ordinary real-estate diligence. The replacement acquisition still has to close with acceptable title, financing, documentation and economics within the exchange structure.
WHAT HAPPENSComplete inspections and legal review, finalize debt and equity, resolve title issues, coordinate closing instructions and confirm the property being acquired matches the identification.
WHO ENTERS THE STORYQI · attorney · title/escrow · lender · broker · property specialists
WATCH FORFinancing delays, title defects, entity mismatches, late documents or acquiring property that does not substantially match what was identified.
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07
RECEIVEBy Day 180*
Receive the replacement property before the exchange period expires.
The IRS states that replacement property in a deferred exchange generally must be received by the earlier of the 180th day after transfer or the due date, including extensions, of the tax return for the year of the transfer.
WHAT HAPPENSThe replacement acquisition closes, exchange funds are applied under the transaction structure and the taxpayer receives the replacement real property.
WHO ENTERS THE STORYQI · title/escrow · attorney · lender · broker · CPA/tax advisor
WATCH FORAssuming Day 180 always controls, closing after the applicable return due date, or acquiring a property that fails the identification/receipt requirements.
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08
CLOSEReplacement closing
Close the exchange—and understand what was actually deferred.
If money or other non-like-kind property is received as part of an exchange, gain may be recognized to the extent of that money or property. Debt, cash, closing costs and basis require transaction-specific tax analysis.
WHAT HAPPENSReconcile the settlement statement, exchange proceeds, financing and any cash or other property received. Preserve the exchange documents and final closing package.
WHO ENTERS THE STORYCPA/tax advisor · QI · attorney · title/escrow · lender
WATCH FORAssuming every dollar of gain is automatically deferred, overlooking taxable “boot,” or failing to preserve documentation needed for tax reporting and future basis calculations.
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