Education
The 1031 exchange, explained plainly
Under IRC §1031, an investor who sells investment real estate and reinvests the proceeds in like-kind property can defer capital gains tax — keeping the full equity working instead of surrendering a third of it. The mechanics are strict; the payoff is compounding.
Exchanging dates back a century, but the modern delayed exchange was shaped by the Starker case and codified in 1984 — the framework of deadlines and intermediaries used today.
The rules
Three principles govern every exchange
Like-kind replacement
Any U.S. investment real estate can replace any other — a rental house, raw land, or a DST interest all qualify.
Equal or greater value
To fully defer, replace both the equity AND the debt from the property you sold.
Hands off the proceeds
Funds must sit with a qualified intermediary between closings — touch the money and the exchange dies.
The timeline
Everything runs on the clock
Day 0
Sale closes
Proceeds transfer to your qualified intermediary. The clock starts.
Day 45
Identification deadline
Replacement property must be identified in writing — under the 3-property, 200%, or 95% rule.
Day 180
Acquisition deadline
Replacement property must close. DSTs can typically accept funds in as little as 2–3 business days — which is how failing exchanges get saved.
Day 45
Three ways to identify
Identification happens in writing, under exactly one of three IRS rules.
Option 1
3-property rule
Identify up to three properties of any value.
Option 2
200% rule
Identify any number of properties, up to 200% of the value you sold.
Option 3
95% rule
Identify more than 200% — but then you must close on 95% of what you named.
The friction
Where exchanges get hard
Finding quality replacement property inside 45 days
Matching or exceeding your debt without over-leveraging
Closing risk — a single fall-through can fail the whole exchange
Management burden of the replacement you buy
Concentration: rolling one property into one property
The structures
Three ways to hold replacement property
Sole ownership
Full control — and full management burden, closing risk, and concentration.
Tenants-in-common (TIC)
Fractional ownership with up to 35 co-owners; unanimous votes make decisions slow.
The modern default
Delaware Statutory Trust (DST)
Fractional, fully passive institutional ownership — the structure that solved the TIC era's problems.
Understand DSTsWhy it matters
Why deferral matters
Deferral is not avoidance — it's leverage. Equity that would have gone to tax keeps earning through every exchange, and heirs may receive a step-up in basis that eliminates the deferred gain entirely.
Get started
Start with a complimentary evaluation
Bring us the property, the timeline, and the goal. You'll leave the first conversation knowing every option on the table — and what we'd do in your position.