Comprehensive model of a like-kind exchange of investment or business real property under Internal Revenue Code § 1031. The calculator computes realized gain, recognized gain (boot under § 1031(b)), deferred gain, substituted basis in the replacement property under § 1031(d), and continuing depreciation on the carryover basis. It models the three identification rules under Reg. § 1.1031(k)-1(c)(4) (3-property, 200%, 95%), enforces the 45-day identification and 180-day acquisition timelines under § 1031(a)(3), handles cash boot and net mortgage boot (debt relief), addresses partial recognition with depreciation recapture, and computes the deferred federal tax at the user's marginal rate. The tool also flags the § 121 + § 1031 combination available for properties converted from primary residence use, and addresses state non-conformity.
This tool is informational only. The like-kind exchange rules are technical and fact-specific. The taxpayer must use a qualified intermediary, satisfy the timeline and identification requirements, avoid constructive receipt of exchange proceeds, and ensure the relinquished and replacement properties are both held for productive use in a trade or business or for investment. Reverse exchanges, improvement exchanges, drop-and-swap transactions, and tenancy-in-common structures all involve additional technical requirements not addressed here. Specific facts may produce a different result. Engage qualified counsel before structuring any like-kind exchange.
Standard forward delayed exchange is the default and is available to all visitors. Reverse exchanges (parking under Rev. Proc. 2000-37), Drop-and-Swap (partnership-level § 1031 with both drop-then-swap and swap-then-drop variants), and Multi-Property (1→N / M→1 / M→N under Reg. § 1.1031(j)-1) are available to all members.
Enter information about the property being given up in the exchange.
Enter information about the like-kind property being acquired. Real property held for investment or productive use in a trade or business is like-kind to other real property held for the same purpose under § 1031(a)(1) (as limited to real property by TCJA effective 2018).
Within 45 days after the relinquished property transfer, the taxpayer must unambiguously identify in writing one or more replacement properties. Choose which rule the identification will satisfy.
The 45-day identification deadline and 180-day acquisition deadline run from the close of the relinquished property sale. Both are statutory and cannot be extended absent a federally declared disaster (Rev. Proc. 2018-58).
Used to compute the dollar value of the deferred gain. The deferred tax is the federal tax that would have been owed on the recognized gain in a non-exchange disposition; this amount is preserved in the basis of the replacement property and comes due when the replacement is sold in a taxable disposition.
If the relinquished property was used as the taxpayer's principal residence for at least 2 of the 5 years preceding sale, § 121(d)(10) permits applying the § 121 exclusion ($250K single / $500K MFJ) to the gain attributable to the residential use period, then exchanging the remainder under § 1031.
When enabled, applies the firm's proprietary methodology to the exchange analysis. The result is presented below alongside the standard calculation so you can see the additional benefit. The underlying technique is reserved to the firm's engagement and is not disclosed in this tool. The strategy has the greatest impact on § 121 + § 1031 combination transactions and on the treatment of the depreciation portion of the gain in the exchange.
Project depreciation on the replacement property under Reg. § 1.168(i)-6, separating the carryover basis (continuing on the relinquished property's remaining schedule) from the excess basis (new asset, full applicable life). Useful for visualizing the running deferred-tax exposure and the year-of-sale recapture if the replacement is later disposed of in a taxable sale.
This projection appears only in member analysis output.
Most states conform to the federal § 1031 like-kind exchange rules. The non-conformity below is general; verify state-specific rules at the time of the exchange.
The calculator above models a standard forward exchange. The structures below are common variations; each involves additional technical requirements not modeled here.
In a reverse exchange, the taxpayer acquires the replacement property before selling the relinquished property. The replacement property is "parked" with an Exchange Accommodation Titleholder (EAT) for up to 180 days, after which the relinquished property must close. Rev. Proc. 2000-37 provides a safe harbor for reverse exchanges; without the safe harbor, the IRS may attack the structure as a constructive receipt. Reverse exchanges are useful when the taxpayer cannot find a buyer for the relinquished property in the 180-day window after identifying the replacement.
In an improvement exchange (also called a construction exchange or build-to-suit exchange), the taxpayer uses exchange proceeds to fund improvements to the replacement property while it is held by the EAT. The improvements must be completed and the property delivered to the taxpayer within the 180-day window. The improvements increase the cost basis of the replacement property for § 1031 purposes only if completed within the deadline.
When real property is held in a partnership and individual partners want to either exchange or cash out, the partnership distributes tenancy-in-common (TIC) interests in the property to the partners pro rata before the exchange. Each partner then independently elects to exchange (under § 1031) or sell. Rev. Rul. 75-292 establishes that the partnership distribution alone does not preclude § 1031 treatment, but the IRS has long argued that the partner's "holding for investment" requirement is jeopardized when the distribution occurs in close proximity to the exchange. Holding the distributed TIC interest for at least one tax year before exchange is the conservative practice.
TIC interests in real property generally qualify as like-kind to other real property under § 1031, provided the TIC arrangement is structured as a co-ownership rather than as a partnership for federal tax purposes. Rev. Proc. 2002-22 sets forth 15 conditions the IRS will examine when issuing a private letter ruling on TIC treatment, including unanimous consent for major decisions, individual rights to sell or encumber, and absence of business activities beyond customary co-ownership.
A Delaware Statutory Trust holding real property may be treated as a grantor trust under Rev. Rul. 2004-86, meaning the beneficial interest holders are treated as direct owners of the underlying real property for § 1031 purposes. DSTs are commonly used as replacement properties for investors seeking passive ownership of institutional-quality real estate while preserving 1031 deferral. The trust must satisfy seven prohibitions ("the seven deadly sins") set forth in Rev. Rul. 2004-86 to maintain grantor trust status.
Realized gain under § 1001(a) = Amount Realized − Adjusted Basis. Amount Realized = Relinquished FMV − Selling Expenses − Adjusted Basis. The Amount Realized includes the FMV of all consideration received: the FMV of the replacement property, cash, and any net liability relief. For a typical exchange, the Amount Realized is equivalent to the value of the relinquished property net of selling costs.
Two forms of boot can trigger gain recognition under § 1031(b). Cash boot is cash or non-like-kind property received by the taxpayer (or paid out by the taxpayer to itself). Mortgage boot (net debt relief) arises when the relinquished mortgage exceeds the replacement mortgage. Under Reg. § 1.1031(b)-1(c), mortgage boot is offset by cash paid (but not by additional debt assumed beyond the relinquished mortgage). Recognized gain equals the lesser of (i) total boot received or (ii) realized gain.
When boot triggers partial gain recognition, the recognized portion is allocated first to depreciation recapture: § 1245 recapture (cost segregation reclass and bonus depreciation portion) is recognized as ordinary income to the extent of boot under § 1245(b)(4) and Reg. § 1.1245-4(d); § 1250 unrecaptured gain is recognized at the maximum 25% rate; residual gain is recognized at LTCG rates. The remaining recapture carries over into the replacement property's basis structure.
The replacement property's basis = Adjusted Basis of Relinquished + Boot Paid + Recognized Gain − Boot Received. Equivalently: New Basis = FMV of Replacement − Deferred Gain. The basis is then allocated between the building shell and personal property components for continuing depreciation purposes. Pre-existing depreciation recapture potential carries into the replacement property.
Under Reg. § 1.168(i)-6, the replacement property's basis is split into two components: (i) the carryover basis (equal to the adjusted basis of the relinquished property at exchange) continues depreciating on the relinquished property's remaining depreciable life and method; and (ii) the excess basis (replacement basis above carryover, attributable to additional cash paid or debt assumed) is depreciated as a new asset over the full applicable life. The taxpayer may elect under Reg. § 1.168(i)-6(i) to treat the entire basis as a single new asset; this is generally less favorable for income tax planning.
Under § 1031(a)(3)(A), the taxpayer must identify replacement properties in writing within 45 days after the relinquished property transfer. Identification must be unambiguous, in a written document signed by the taxpayer, delivered to the qualified intermediary or other party to the exchange (not the seller of replacement property). The taxpayer may revoke or amend identifications within the 45-day window. After day 45, the identifications are locked.
Under § 1031(a)(3)(B), the replacement property must be acquired within the earlier of (i) 180 days after the relinquished property transfer, or (ii) the due date (including extensions) of the taxpayer's federal income tax return for the year in which the relinquished property was transferred. For an exchange closing late in the year, the 180-day window is often truncated by the tax filing deadline, requiring the taxpayer to file an extension to preserve the full 180 days. Federally declared disaster relief under Rev. Proc. 2018-58 may extend these deadlines.
Under Reg. § 1.1031(k)-1(g)(4), the taxpayer must use a qualified intermediary (QI) to hold the exchange proceeds during the period between sale of relinquished property and acquisition of replacement property. The QI is a person who is not the taxpayer, a related party, or a disqualified person. Constructive receipt of the proceeds by the taxpayer voids the exchange.
The deferred federal tax shown in the results = (Federal tax that would have been owed on the recognized gain in a non-exchange sale) − (Federal tax recognized in the exchange under § 1031(b) due to boot). This deferred amount is preserved as a reduction of the replacement property's basis and becomes due when the replacement is sold in a taxable disposition (or is permanently eliminated if held until death and stepped up under § 1014).
Under § 121(d)(10), property converted from principal residence use to rental or investment use within the 5-year window preceding sale may qualify for the § 121 exclusion ($250K single / $500K MFJ) on the residential portion of the gain. The remaining gain may then be exchanged under § 1031. The interaction is fact-specific: the property must have been used as the taxpayer's principal residence for 2 of the 5 years preceding sale (§ 121(a)) and held for investment or productive use in a trade or business at the time of exchange (§ 1031(a)(1)). Both requirements must coexist with respect to the same property at different points in the 5-year window. Depreciation taken after May 6, 1997 is not excludable under § 121 (§ 121(d)(6)) and is treated as § 1250 unrecaptured gain at sale.
The tool computes a federal-level analysis. It does not model: (i) state taxes other than the simplified marginal-rate computation; (ii) holding period considerations (the replacement property tacks the relinquished property's holding period under § 1223(1)); (iii) related-party rules under § 1031(f) which impose a two-year holding requirement; (iv) installment treatment of boot received in a deferred exchange; (v) partnership-level exchange issues, including the "drop-and-swap" partnership distribution timing; (vi) qualified intermediary mechanics, fees, and escrow arrangements; (vii) earnest money or option payments treated as cash boot; (viii) reverse exchange or improvement exchange parking arrangements. Consult qualified counsel for any of these scenarios.