Four 1031 Exchange Examples, Worked to the Dollar
Dwaine Clarke · NNN Deal Finder / GCT Commercial
Published July 16, 2026
Rules explain; numbers convince. Four exchanges — three wins and one near-miss — with the arithmetic that decided them. (Simplified for clarity; see the FAQ.)
Example 1: the clean full deferral
Maria sells a duplex portfolio: $1.8M price, $600K remaining basis, $450K mortgage. Straight sale, her combined federal-state-recapture bill approaches $340K. Instead she identifies and closes a Wawa ground lease at $1.85M, replacing the debt with a $475K loan and rolling every exchange dollar through her QI. Deferral: complete. Her old $600K basis carries over (adjusted for the small buy-up), depreciation restarts on the improvement allocation, and the $340K that would have gone to tax now earns a 5.1% cap — roughly $17K a year of income that tax money is producing.
Example 2: deliberate partial — taking some chips off
Tom sells land for $900K (basis $200K) and wants $150K of cash for a family need. His QI distributes the $150K at closing (cash boot — taxable), and Tom exchanges the remaining $750K into a Dollar General at exactly that price. He pays tax only on the $150K he pocketed; the other $550K of gain stays deferred. Partial exchanges work fine when they’re chosen — the failure mode is discovering boot you didn’t intend.
Example 3: one building into three states
A retiring couple exits a $3.6M self-storage facility. Under the 200% rule they identify five NNN properties totaling $6.9M and close on three: a Florida QSR pad ($1.5M), a Tennessee dollar store ($1.1M), and a Texas auto-parts store ($1.05M) — $3.65M combined, debt matched, full deferral. One management-heavy asset became three corporate leases across three no-income-tax states with staggered lease expirations. This is the diversification play the identification rules quietly enable.
Example 4: the rescue that backups bought
Dev identifies one property — a car wash at a juicy cap — and nothing else. Day 58: the operator’s financials fail his lender’s covenant review. With a frozen one-name list, his exchange is dead and a $290K tax bill crystallizes… in the version where he’d gone alone. In the actual file, his identification listed two backups; the second — a seasoned 7-Eleven — closed on day 141. The rescue wasn’t clever; it was written on day 44.
The pattern across all four: the tax math rewards preparation linearly, and punishes improvisation exponentially. Structure your own version before the clock starts — that’s what we do.