Sell. Exchange. Stay invested.

The basics of a
1031 exchange

Section 1031 of the Internal Revenue Code allows you to defer recognizing capital gain when you exchange real property held for productive use in a trade or business or for investment for other like-kind real property.

Since 2018, Section 1031 applies only to exchanges of real property. Real property held primarily for sale, such as inventory or fix-and-flip projects, does not qualify. Most exchanges are deferred exchanges completed through a qualified intermediary, which holds the sale proceeds between the sale of the relinquished property and the purchase of the replacement property.

Two deadlines matter

From the day you close on the sale of your relinquished property, you have 45 days to identify potential replacement property in writing, and 180 days (or your tax return due date, including extensions, if earlier) to receive the replacement property. The two periods run at the same time, not back to back.

Full deferral and “boot”

To defer all of the gain, investors generally acquire replacement property of equal or greater value and reinvest all of the equity, replacing any debt that was paid off. Cash or other non-like-kind property received in the exchange, often called boot, is generally taxable in the year of the exchange. Exchanges are reported to the IRS on Form 8824.

How Icon America fits

Icon’s real estate work centers on student housing and multifamily communities in university markets across the country. Whether you are early in your planning or already inside your 45-day identification window, our team can walk through your timeline, your equity and debt to replace, and what to look for in replacement property.

• Student housing and multifamily communities in university markets
• A team that understands 1031 timelines and documentation
• Guidance on how an exchange may fit alongside our other offerings

General information only, based on IRS guidance for like-kind exchanges of real estate (Internal Revenue Code Section 1031 and IRS Form 8824 instructions). Rules depend on your individual circumstances. Consult your tax, legal and financial advisers before entering an exchange. Source: IRS: Like-kind exchanges, real estate tax tips.