IRC Section 1031 Like-Kind Exchanges: 45-Day Identification Rules, 180-Day Deadlines & Mortgage Boot
A tax and real estate guide to Section 1031 tax-deferred exchanges, 3-property vs 200% identification rules, mortgage relief boot, and DSTs.
1031 Exchange Tax Shield Calculator
Model 45-day identification timelines, cash boot, and depreciation recapture deferral
Empirical Analysis & Findings
## IRC Section 1031 Tax-Deferred Exchange Rules
Section 1031 of the Internal Revenue Code allows commercial real estate investors to defer 100% of federal capital gains taxes, state taxes, and 25% depreciation recapture by rolling sale proceeds into like-kind real estate.
### 1. The Strict 45-Day and 180-Day Timeline
Deadlines run concurrently from the closing date of the relinquished property:
- **Day 0**: Relinquished property closes; proceeds transfer directly to a Qualified Intermediary (QI).
- **Day 45 (Identification Deadline)**: Exchanger must identify replacement properties in writing under the **3-Property Rule** (any value) or **200% Rule** (aggregate value <= 200% of sale price).
- **Day 180 (Exchange Closing Deadline)**: Full purchase and deed transfer of replacement properties must conclude.
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Frequently Asked Questions
What are the strict deadlines for an IRC Section 1031 exchange?
The exchanger must formally identify replacement properties within 45 calendar days of selling the relinquished property and close on the replacement within 180 calendar days.
What is 'mortgage boot' and how does it create unexpected tax liability?
Mortgage boot occurs when debt on the replacement property is lower than debt paid off on the relinquished property; the debt relief is taxed as capital gains unless offset with additional cash.
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