1031 Like-Kind Exchange Planning
Our firm guides clients through like-kind exchanges to defer taxable gains on real estate. The Wilson Firm’s lawyers coordinate with qualified intermediaries, confirm eligibility, and ensure documentation meets IRS requirements. We help structure replacement property timelines, debt matching, and boot minimization before contracts are signed. Every agreement is reviewed for tax terms that support deferral and align with reporting obligations.
Defining 1031 Exchanges
A 1031 exchange allows real estate investors to defer capital gains tax by reinvesting proceeds from a sale into a qualifying replacement property. To preserve deferral, the transaction must meet strict timing and documentation requirements under federal tax law.
When structured properly, a 1031 exchange can preserve gains, improve cash flow, and support long-term portfolio growth.
Key Requirements:
- Like-kind property: Both relinquished and replacement assets must be held for investment or business use.
- Qualified intermediary: A third party must facilitate the exchange and hold proceeds.
- Timeline compliance: Identify replacement property within 45 days and close within 180 days.
- Boot minimization: Avoid receiving cash or non-like-kind property to preserve full deferral.
- Debt replacement: Match or exceed debt levels from the relinquished property.
- Contract terms: Agreements should reflect exchange intent and support reporting obligations.
Importance of 1031 Exchanges
A properly executed 1031 exchange allows investors to defer capital gains tax when selling and reinvesting in qualifying real estate. This strategy preserves liquidity and supports long-term portfolio growth without triggering immediate tax liability.
Why It Matters:
- Defers federal capital gains tax on appreciated property.
- Preserves full reinvestment potential by avoiding tax drag.
- Supports portfolio diversification across asset classes or geographies.
- Enables strategic timing of future taxable events.
- Improves cash flow and leverage for replacement acquisitions.
- Requires strict compliance with IRS rules on timing, property type, and intermediary use.
When aligned with investment goals and properly documented, a 1031 exchange can be a powerful tool for building and preserving real estate wealth.
How The Wilson Firm Helps with 1031 Exchanges
We provide legal guidance on the structuring and execution of 1031 exchanges in compliance with federal tax law. Our attorneys assist clients in coordinating with qualified intermediaries, reviewing exchange agreements, and ensuring timelines and documentation meet IRS requirements. We also advise on title transfers, debt replacement, and contract language to support like-kind treatment. Each matter is approached with attention to investment intent, property classification, and procedural accuracy.
Case Example
A Dallas-based developer structured a 1031 exchange by selling a portfolio of industrial warehouses in Fort Worth and reinvesting into a logistics center in Houston. The transaction used a qualified intermediary to meet the 45-day identification and 180-day closing deadlines, ensuring the properties qualified as like-kind investment real estate. Legal counsel ensured compliance with the Texas Property Code for title transfers and coordinated environmental due diligence. This structure allowed the investor to upgrade holdings in Texas’s logistics market while deferring federal capital gains taxes.
Frequently Asked Questions
For real property, “like-kind” is broad: most investment or business-use real estate can be exchanged for other investment/business real estate (e.g., raw land ↔ apartment, retail ↔ industrial). Personal-use property doesn’t qualify.
Exchanges with related parties face special holding-period and anti-abuse rules. Certain swaps may be disallowed or require both sides to hold properties for a specified period; failing these rules can trigger immediate tax.
A primary residence doesn’t qualify. A vacation home may qualify only if converted to investment/business use and held for a sufficient period with documented rental intent; strict use and holding requirements apply.
Refinancing too close to the sale or acquisition can look like boot extraction. Many investors avoid pre-sale cash-outs and instead consider refinancing the replacement property after the exchange closes and operations stabilize.
You can (a) identify up to 3 properties regardless of value, (b) identify any number whose total value doesn’t exceed 200% of the relinquished value, or (c) acquire 95% of the total value identified if you exceed the other limits.
