Raw Land in a 1031 — Buying It, Selling It, Qualifying It

Raw land is fully like-kind to every other investment real property — no improvement requirement exists in either direction. Land into buildings, buildings into land, land into land: all valid, all common, all running the standard exchange machinery.

Selling land: the intent screens

Land draws extra IRS attention on one axis — dealer status. Subdividers, lot-sellers, and developers hold land as inventory, which fails 1031 regardless of appreciation dreams. The screens: how many parcels have you sold, did you improve or entitle for resale, how was it reported? A decade-held acreage sold whole is clean; a platted subdivision moving lots quarterly is a business, not an investment. Gray-zone owners (one big parcel, some entitlement work) want counsel positioning before listing.

The land-to-income walk

The most common land exchange we run: appreciated dirt producing nothing becomes income-producing NNN property — a farm edge swallowed by a metro turning into a Dollar General portfolio, deferring twenty years of gain while replacing zero cash flow with monthly rent. Financing note: raw-land sellers often hold their asset free and clear, so no debt-replacement burden exists — the whole equity moves clean, one of the simpler exchange profiles there is.

Buying land: eyes open

Exchanging into raw land defers just as well — investors bank future development paths or ride appreciation — but know what you’re buying tax-wise: no depreciation (nothing improves), no income against carrying costs, and the eventual development itself can complicate later exchanges. And mind the intent symmetry: replacement land flipped to a builder in eighteen months hands the IRS the dealer argument you avoided on the way in.