1031 Exchange Rules — Every Requirement That Decides Your Deferral

Every failed exchange we’ve seen died on one of seven rules — never on obscure ones. Here is the full working set, in the order they bite, written for sellers heading into NNN replacement property.

1. Qualifying property: held for investment

Both the property you sell and the one you buy must be held for investment or business use. Rentals, commercial buildings, NNN assets, farmland — all fine. Your home, a flip, a property bought to resell — not fine. Intent is judged by behavior: rental history, tax treatment, holding period.

2. Like-kind: broad for real estate

Since 2018, only real property qualifies — but within real estate, like-kind is generous. Land swaps for buildings, apartments for a Dollar General lease, a warehouse for a ground lease. Improvements-for-land, leaseholds over 30 years, and mineral interests carry nuances worth a professional read.

3. The two clocks: 45 and 180

Identification in writing by midnight of day 45 after closing; acquisition by day 180 or your tax-return due date, whichever lands first. Calendar days, no weekends-and-holidays grace. Q4 sellers: extend your return or forfeit the tail of your 180. Run your dates on the deadline calculator.

4. Identification: three properties or 200%

Name up to three candidates regardless of value, or any number up to 200% of your sale price in combined value. Delivered, signed, unambiguous, to your qualified intermediary. After day 45 the list is frozen — you can close only on what’s written.

5. The qualified intermediary: mandatory plumbing

You may not touch the proceeds. A QI holds funds between closings under an exchange agreement signed before your sale closes. Set this up during escrow on the relinquished property — a QI engaged the day after closing is a QI engaged too late.

6. Equal or greater: value, equity, and debt

Full deferral means buying at or above your net sale price, reinvesting all equity, and replacing the debt you retire (or substituting cash for it). Any shortfall is boot — taxable up to your gain. Partial exchanges are legal; accidental ones are just bad math.

7. Same taxpayer in, same taxpayer out

The tax owner who sells must acquire. Don’t dissolve the LLC mid-exchange, don’t shift title to a spouse, don’t split partnership interests without months of advance planning. Single-member LLCs and revocable trusts are disregarded and safe; everything fancier needs counsel first.

Miss none of these and the deferral is mechanical. The rules are the easy 20% — execution against the clock is the other 80%, and that’s what free buyer representation exists for.