1031 Exchange Rules: Timelines, 45/180 Days, 200% Rule, Boot

By Skyline Capital Investments · Updated October 26, 2026 · 10 min read

What are the 1031 exchange rules?

The 1031 exchange rules require you to exchange real property held for investment or business use for other like-kind real property, with a qualified intermediary holding the proceeds, a written identification within 45 days and a closing within 180 days. To defer all of the gain, you also need to buy at least as much as you sold and reinvest all the net cash.

The rules come from three places. Section 1031 of the Internal Revenue Code sets the basic deal and the deadlines. Treasury Regulation 1.1031(k)-1 fills in how deferred exchanges work, including identification and intermediaries. IRS revenue procedures add safe harbors for reverse exchanges and disaster relief. Courts have shaped the rest, starting with the Starker case.

1031 exchange requirements checklist

Every requirement in the table has to be met. Missing one usually makes the whole gain taxable.

The 1031 exchange timeline: 45 and 180 days

The 1031 exchange timeline starts on the day your relinquished property transfers to the buyer, and from that date you have 45 days to identify and 180 days to close. The two periods run at the same time. Day 180 is 135 days after day 45, not 180 days after it.

Both periods count calendar days and end at midnight. Weekends and federal holidays count, and a deadline that falls on one does not move to the next business day. The table uses a sale that closes on Tuesday, November 17, 2026.

The tax return due date can shorten your 180 days

Your exchange period ends on the earlier of day 180 or the due date of your tax return for the year of the sale, including extensions. For most owners that only matters on sales after mid-October, but it catches people every year.

In the example above, an individual who sold on November 17, 2026 and files the 2026 return on time on April 15, 2027 has only 149 days to close. Filing an extension by April 15 restores the full 180 days through May 16. Partnerships and S corporations have a March 15 due date for calendar-year returns, so an entity that sells in the fall has an even earlier cutoff. Ask your CPA to file the extension before the original due date if your replacement has not closed.

Identification rules: 3-property, 200% and 95%

You must satisfy one of three identification rules when you list replacement properties: the three-property rule, the 200% rule or the 95% rule. They come from Treas. Reg. 1.1031(k)-1(c)(4) and apply to the list as it stands at the end of day 45.

• The three-property rule is the default for most owners because it has no value test.
• The 200% rule helps when you want a longer list of smaller properties, such as several duplexes or a mix of DST interests.
• The 95% rule is a last resort. If even one listed property falls through, you likely fail it, and then every property on the list is treated as unidentified.
• If your list breaks all three rules, the regulation treats you as having identified nothing, except property you actually received within the 45 days.

How to identify replacement property correctly

Identification must be a written document, signed by you, that describes each property without ambiguity and is delivered before midnight of day 45 to the intermediary or another person involved in the exchange who is not you or a disqualified person. A street address, a legal description or a distinguishable name for a building is enough. For a DST, name the trust and the offering.

You can change your list during the 45 days by revoking an identification in a signed writing delivered the same way. After day 45 the list is locked. Any property you actually close on within the 45 days counts as identified automatically.

Small extras that come with a building, such as furniture in a furnished rental, do not need their own line if their value is no more than 15% of the real property. That is the incidental property rule in Treas. Reg. 1.1031(k)-1(c)(5). Anything above that, or anything that is not real property, may be boot.

Like-kind property rules

Any real property in the United States held for investment or business use is like-kind to any other U.S. real property held the same way. You can exchange an apartment building for raw land, a single-family rental for a warehouse, or a retail center for an interest in a DST.

The limits are on use, not on type. A home you live in is not held for investment. Property held primarily for sale, such as a fix-and-flip or a developer’s lots, does not qualify. U.S. property cannot be exchanged for property abroad. A partnership or LLC interest is not real property, even when the entity owns nothing but real estate.

How long you must hold the property

Section 1031 does not set a minimum holding period, but you must hold both properties for investment or business use, and the IRS looks at your intent at the time of the exchange. A property bought and sold within a few months can look like it was held for resale.

Many advisors suggest holding at least a year, and longer if you can, so the facts support investment intent. There is one hard holding rule: in an exchange with a related party, both sides must keep their properties for two years. For a home converted to a rental, or a rental converted to a home, other timing rules apply, covered in our guide to a 1031 exchange and your primary residence.

The same taxpayer rule

The person or entity that sells the relinquished property must be the one that takes title to the replacement. If your LLC taxed as a partnership sells, that LLC must buy. If you own the building in your own name, you must take title in your own name.

A single-member LLC that is disregarded for tax purposes is treated as its owner, so you can usually sell in your own name and buy through a new single-member LLC. Changing from one multi-member partnership to another, or splitting partners apart before the sale, is where exchanges get complicated. Settle the ownership structure with your CPA well before the sale.

Boot rules: cash and mortgage boot

Boot is any money or non-like-kind property you receive, plus any net debt relief, and you recognize gain equal to the lesser of your boot or your total gain. You cannot recognize a loss in an exchange.

Cash boot is the simplest: any exchange money the intermediary pays to you, or uses for non-closing costs such as loan fees, repairs or security deposits credited to the buyer, is taxable. Mortgage boot arises when the debt on your replacement is smaller than the debt paid off on the property you sold.

The netting rules are lopsided. New debt you take on offsets debt you are relieved of, and extra cash you put in also offsets debt relief. Taking on more debt does not offset cash you receive. So if you want to pull cash out, it is taxed even if your new loan is larger than the old one.

Worked example: a partial exchange with boot

You sell a 12-unit building for $1,500,000 with $60,000 in selling costs, so your amount realized is $1,440,000. Your adjusted basis is $700,000 after $300,000 of depreciation, so your gain is $740,000. The $500,000 mortgage is paid off at closing and the intermediary holds the remaining $940,000.

You buy a $1,300,000 replacement using $840,000 of the exchange funds and a new $460,000 loan. The intermediary returns the unused $100,000 to you after closing. That $100,000 is cash boot. Your new debt is $40,000 less than the $500,000 you paid off, which is $40,000 of mortgage boot. Total boot is $140,000, so you recognize $140,000 of gain and defer the other $600,000.

Because the building has $300,000 of prior depreciation, the recognized gain is generally taxed first as unrecaptured Section 1250 gain at up to 25%, or $35,000. If you are subject to the 3.8% net investment income tax, add $5,320, for about $40,320 of federal tax. Your basis in the new building is $700,000, its $1,300,000 cost minus the $600,000 deferred gain.

To defer everything, you would have needed a replacement of at least $1,440,000, all $940,000 of cash reinvested, and at least $500,000 of new debt or added cash to cover the old loan. The 1031 exchange calculator runs these numbers for your own sale.

Rules for the money: constructive receipt

You cannot receive, borrow against or pledge the exchange funds during the exchange period, even if you never spend them. Treas. Reg. 1.1031(k)-1(g)(6) requires the exchange agreement to limit your rights to the money.

The regulation allows the intermediary to release funds early in only a few cases: after day 45 if you identified nothing, after you have received all the replacement property you are entitled to, or after a material and substantial contingency that arises after day 45, is outside your control and is set out in the agreement in writing. Otherwise the money stays with the intermediary until day 180 or the end of the exchange period. Your intermediary cannot be your agent from the past two years, such as your attorney, accountant, employee or real estate broker, or a related party. Our guide to choosing a 1031 qualified intermediary covers fees and how to protect the funds.

1031 exchange rules for related parties

You can exchange with a related party, such as a parent, child, sibling, spouse or a company you control, but both of you must hold the properties for two years after the exchange. If either side sells within two years, the deferred gain generally becomes taxable in the year of that sale, under Section 1031(f).

Exceptions apply for a sale after the death of either party, an involuntary conversion such as a condemnation, or a showing that tax avoidance was not a principal purpose. Buying your replacement from a related party through an intermediary is often treated as a basis shift and denied unless the related party is also doing an exchange. You must file Form 8824 for the year of the exchange and the two years after.

1031 Starker exchange rules

A Starker exchange is another name for a delayed exchange, and it follows the same 45-day and 180-day rules as any forward exchange. The name comes from Starker v. United States, a 1979 Ninth Circuit decision that allowed T.J. Starker to defer tax even though he received the replacement properties years after giving up his timberland.

Congress responded in 1984 by adding the 45-day and 180-day limits now in Section 1031(a)(3). The 1991 regulations then created the qualified intermediary safe harbor. So the Starker exchange rules in 2026 are the deferred exchange rules in Treas. Reg. 1.1031(k)-1, not anything left over from the court case.

Reverse 1031 exchange rules and timeline

In a reverse 1031 exchange, an exchange accommodation titleholder holds title to one property while you complete the other side, and the safe harbor rules in Revenue Procedure 2000-37 set its timeline. The clock starts when the titleholder takes title, not when you sell.

• The total time both properties can sit with the titleholder is also capped at 180 days.
• There is no extension inside the safe harbor, so line up the sale side before the titleholder closes. Our reverse 1031 exchange guide covers financing, costs and improvement exchanges.

California 1031 exchange rules

California follows the federal 1031 rules but keeps the right to tax gain on California property you exchange for property in another state. If you sell a California building and buy in Texas or Arizona, you must file Form FTB 3840 for the year of the exchange and every year after until the deferred California gain is recognized. When you later sell the out-of-state property in a taxable sale, California collects tax on the deferred California gain.

California also requires withholding of 3 1/3% of the sales price on most real estate sales over $100,000, reported on Form 593. A valid deferred exchange is exempt from withholding when the sale closes, but the intermediary must withhold 3 1/3% of any cash boot over $1,500 it pays you, or of the full sales price if the exchange fails.

1031 exchange rules for 2025 and 2026

The 1031 exchange rules did not change in 2025 or 2026. The 2025 tax law, P.L. 119-21, made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025, but it did not amend Section 1031.

The last major change was the 2017 tax law, which limited exchanges to real property starting in 2018. The bonus depreciation change can still affect your plan. A replacement building with a cost segregation study may produce larger first-year deductions on the part of its basis that exceeds the carryover basis, so ask your CPA to model it.

Can the 45-day or 180-day deadline be extended?

Only for federally declared disasters. Under Section 7508A and section 17 of Revenue Procedure 2018-58, the IRS can postpone the 45-day and 180-day deadlines for taxpayers in a disaster area or whose property, intermediary, lender or title company is affected.

The relief is set in the IRS notice for each disaster, so read the notice for your area rather than assuming a fixed number of days. Outside a declared disaster, there is no extension for illness, a slow lender or a seller who backs out. Plan the dates as if they are fixed, and keep a backup property on your 45-day list.

Selling your apartment building inside the rules

The sale side sets your clock, so the buyer you choose can make the timeline easier or harder. Skyline buys apartment buildings with five or more units nationwide. We buy directly, close on your timeline, and can work inside 1031 deadlines. We work with your intermediary on the assignment and can set a closing date that gives you time to line up a replacement first.

For the bigger picture on how exchanges work and the other types available, start with our complete 1031 exchange guide.