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The intermediary handles the money. Somebody still has to report the exchange, compute the boot and carry the old basis into the new property. We do that part, and it is where you find out how much you deferred.
Key highlights
Under section 1031 you defer gain on the disposal of real property held for business or investment where the proceeds go into like kind real property. Since 2018 you can only do this with real property, so equipment, livestock and other personal property no longer qualify. You report the exchange on Form 8824 with the return for the year you sold the relinquished property.
Your intermediary and your accountant are separate roles, and the same party cannot fill both.
Both clocks start on the day the relinquished property closes, and they run at the same time.
Proceeds go to a qualified intermediary. Touch the money yourself and the exchange is over before it starts.
Replacement property named in writing. No extensions, and weekends and holidays do not move it.
Or the return due date for that year, including extensions, whichever comes first.
Both clocks start on the same day and run together
The 45 days are not added to the 180. Day 45 falls inside the 180 day window, so a slow identification eats the time you have left to close.
Plan around that last rule. Start an exchange in November and you may need to extend the return purely to keep the full 180 days.
Boot is anything you receive that is not like kind property, and it is taxable to the extent of your gain.
Proceeds you did not reinvest, including amounts held back at closing for reasons that seemed practical at the time.
You take on a smaller mortgage on the replacement than you cleared on the relinquished property, and that is boot even though no cash changed hands.
Anything in the trade that is not real property.
You can pay some closing costs this way and others create boot, and a settlement statement will not tell you which is which.
People create boot at closing without thinking about tax. You pay far less to identify it before you sign the closing statement than to report it afterwards.
Send the relinquished property's depreciation schedule and the outline of what you plan to buy. We will tell you what defers, what does not, and what the replacement schedule will look like.
You do not start fresh on the replacement property.
You take the basis from the relinquished property, adjusted for boot and any additional cash you put in. So you compute the depreciation schedule on the new property from what you had left in the old one, plus the excess, and not from what you paid.
You carry the deferred depreciation too. Everything you would have recaptured on a sale is still there on the replacement property.
Plan an exchange and a cost segregation study on the replacement property together, because you start the study from the basis the exchange leaves you with.
You touch the proceeds, even briefly, and the exchange ends at that moment
You identify late, informally, or describe the property too loosely to enforce
You buy a replacement worth less than the relinquished property, and you create boot you did not expect
You deal with a related party on the other side, which brings its own holding rules
One entity sells and another buys, so you break the same taxpayer requirement
You decide four of these five before closing, and you cannot fix them afterwards.
Priced on the transaction, not on the tax deferred. What we quote against:
These are the factors, not a quote.
You just sold a home and you know you have capital gains… You just made a big purchase or you made a big sale in cryptocurrency or equity or stock. You don't know how that will affect your taxes. Plan early because if you don't there might be a surprise.
I've worked with them on my state and federal taxes and the sale of a condo. They gave clear and thoughtful advice each time. I wouldn't work with anyone else.
This page is general information rather than advice for your circumstances. Outcomes turn on facts specific to you, so speak to a CPA before acting on anything here.
You decide almost everything about an exchange before the relinquished property closes. Send the depreciation schedule and what you are planning to buy.
