Navigate a 1031 like-kind exchange with our 1031 exchange checklist. For real estate investors, agents, and advisors. Section 1031 allows deferral of capital gains when you sell investment or business real property and acquire like-kind replacement property. This checklist covers the critical deadlines (45-day identification and 180-day closing), use of a qualified intermediary (QI), no constructive receipt of proceeds, like-kind and same-taxpayer rules, and value-and-equity requirements. Use it to stay on timeline and avoid disqualifying the exchange. Consult a tax advisor and QI for your situation.
The QI must be in place before you close on the sale. The sale documents (e.g. deed, settlement statement) should direct proceeds to the QI per the exchange agreement. Do not close without an exchange agreement and QI instructions in place.
The agreement typically assigns your rights under the sale contract to the QI and directs the buyer to pay the QI. The QI then uses the funds to acquire the replacement property. Your advisor or QI will provide the form; sign before relinquished property closing.
At closing, sale proceeds go to the QI, not to you. Do not receive funds, have use of funds, or have the right to borrow against them. Document the closing date—this starts the 45- and 180-day clocks.
Identification must be in a signed, written document (e.g. letter to QI) and delivered by midnight on the 45th day. You can identify up to 3 properties regardless of value, or more under the 200% or 95% rules. Get the identification to the QI in time and keep a copy.
Replacement property must be received by the earlier of 180 days after the relinquished sale or the due date (with extensions) of your tax return for the year of the sale. Coordinate with title and QI so funds are disbursed correctly at replacement closing.
Both relinquished and replacement must be held for investment or used in a trade or business. Personal use property does not qualify. Confirm with your tax advisor that your properties meet like-kind and holding requirements.
The person or entity that sold the relinquished property must be the one that acquires the replacement. Title must match; entity name changes or different LLCs can cause issues. Plan entity and title with your advisor.
To defer all gain: replacement property fair market value must equal or exceed relinquished, and you must invest all net equity (reinvest all cash from the sale and match or increase debt). Otherwise you may have boot (taxable amount). Work with your advisor on numbers.
At replacement closing, the QI sends the exchange proceeds to the title company or seller. You receive title to the replacement property. Ensure the closing statement and deed reflect the exchange; the QI will provide instructions.
Keep the exchange agreement, 45-day identification letter, settlement statements for both properties, and any QI accounting. You will need these for your tax return (Form 8824) and in case of audit.