1031 Exchange Elite · Education Hub

How does a 1031 exchange actually work?

The rules are strict, the deadlines are real, and the tax savings can be enormous. Here's everything you need to know — from the day you list your property to the day you close your replacement.

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Day 0
Sale closes
Both clocks start
45
Day deadline
Identify replacement
180
Day deadline
Close replacement
$0
Tax due at close
Deferred, not forgiven
The Basics

What is a 1031 Exchange?

Section 1031 of the IRS tax code allows you to sell an investment property and reinvest the proceeds into a new "like-kind" property — deferring all capital gains taxes in the process. You keep more capital working for you instead of writing a check to the IRS.

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Like-Kind Property
Both the sold property and the replacement must be held for investment or business use. The definition is broad — you can exchange an apartment building for raw land, or a rental house for a commercial building.
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Strict Deadlines
A deferred exchange generally requires written identification within 45 days. Replacement property generally must be received within 180 days or by the federal tax-return due date, including extensions, whichever is earlier. Ask your QI and tax advisor to confirm the dates for your facts.
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Qualified Intermediary
You cannot touch the money. A licensed Qualified Intermediary (QI) holds your sale proceeds in escrow and transfers them directly to the replacement property. Receiving the funds yourself disqualifies the exchange.
Scenario Sale Price Tax Owed (California seller) Capital Reinvested
Sell without a 1031 $3,000,000 ~$700,000+ ~$2,300,000
Sell with a 1031 Exchange $3,000,000 $0 at close $3,000,000

Example only. Actual tax liability varies. Consult your CPA.

Step by Step

The Exchange Process

Six phases. Every one matters. Miss a step or a deadline and the entire exchange can be disqualified.

01
Engage Your Team Before You List
Contact 1031 Exchange Elite and your Qualified Intermediary before your property hits the market. The QI Exchange Agreement must be in place before the sale closes — not after. We begin identifying Las Vegas replacement properties matched to your budget on Day 1.
Pre-listing phase
02
Sale Closes — Clocks Start
The transfer date generally starts the identification and exchange periods. A properly engaged Qualified Intermediary can hold proceeds under the exchange agreement. Confirm the written-identification deadline and the earlier applicable receipt deadline with the QI and tax advisor.
Day 0 — both deadlines activate
03
Identify Replacement Property
You must submit written identification of your replacement property to your QI by midnight of Day 45. You may identify up to 3 properties regardless of value. We work with you during this window to narrow your Las Vegas options and get offers in place before the clock expires.
Days 1–45
04
Due Diligence & Financing
Once identified, we open escrow and begin inspection, title search, and appraisal on your replacement property. If you're financing, your lender needs time — aim to close by Day 120–150 to avoid cutting it close. Exchange funds cover all due diligence costs through your QI.
Days 45–150
05
QI Transfers Funds at Close
Your QI wires the exchange proceeds directly to the replacement property's escrow. You never touch the money. The replacement property must close by Day 180, or by your tax-return due date if that comes first. Weekends and holidays don't extend it. Missing this deadline disqualifies the entire exchange.
Days 45–180
06
File IRS Form 8824
Report the completed exchange on IRS Form 8824 with your annual tax return for the year the exchange occurred. Your CPA handles the filing. The replacement property inherits the adjusted basis from your sold property, and your tax liability is deferred until you eventually sell without exchanging.
Tax filing season
Critical Deadlines

The Two Clocks You Cannot Miss

These are the general federal timing rules. Transaction facts, tax-return timing, and limited IRS relief can matter. Confirm the exact dates and current guidance with your QI, CPA, and attorney.

Identification Deadline
45 days
Replacement property generally must be identified in a signed writing delivered within the 45-day period to a permitted person involved in the exchange. Multiple-property identification rules can apply. Ask the QI and tax advisor to approve the identification process and document.
Close Deadline
180 days
Replacement property generally must be received within 180 days or by the federal tax-return due date, including extensions, whichever is earlier. Ask your tax advisor whether an extension is appropriate and confirm the actual receipt deadline in writing.
Pro tip from Ken & Yorgho

Start your replacement property search before your relinquished property closes — not after. We begin identifying Las Vegas options for our clients the moment they're under contract on the sale side. By Day 0, you should already have 2–3 properties you're serious about.

The QI

Your Qualified Intermediary

The QI is the most critical third party in your exchange. They hold your funds, document the transaction, and ensure IRS compliance. Choosing the wrong one — or skipping the process — can cost you the entire tax deferral.

What a QI does
  • Executes the Exchange Agreement before your sale closes
  • Receives and holds your sale proceeds in a segregated escrow account
  • Documents your written property identification
  • Transfers funds directly to your replacement property escrow
  • Provides IRS-compliant exchange accounting for your tax return
  • Coordinates with both title companies throughout the process
Who cannot be your QI
  • Your real estate agent or broker
  • Your attorney (if they've represented you in the last 2 years)
  • Your CPA or financial advisor
  • Any family member or related business entity
  • Anyone who has acted as your agent within 2 years of the exchange
We work with a network of vetted, licensed Qualified Intermediaries and can refer you to one that fits your exchange size and timeline.
Common Questions

1031 Exchange FAQ

The questions we hear from every investor, answered plainly.

Can I do a 1031 exchange on my primary residence? ▼
No. Section 1031 applies only to property held for investment or productive use in a trade or business. Your primary home doesn't qualify. However, if you've converted a former primary residence into a rental property, it may be eligible — consult your CPA on the holding period requirements.
What happens if I can't find a replacement property in time? ▼
Missing an applicable identification or receipt requirement can prevent the intended deferral. The tax result and timing of any fund release depend on the exchange agreement and transaction facts. Confirm both with the QI, CPA, and attorney.
Can I exchange into multiple replacement properties? ▼
Yes. You can exchange one property for multiple replacement properties, or multiple properties for one. The standard rule allows you to identify up to 3 properties of any value. You can also use the 200% rule (any number of properties as long as their combined value doesn't exceed 200% of your sold property) or the 95% rule.
What is "boot" and how does it affect my exchange? ▼
"Boot" is any cash or non-like-kind property you receive during the exchange. If you don't reinvest all of your proceeds into the replacement property — for example, if your replacement is less expensive than your sale — the difference is boot and is taxable. To defer 100% of your gains, your replacement property must be equal to or greater in value than your sold property, and you must reinvest all equity.
Does the tax go away eventually? ▼
A 1031 exchange defers the tax — it doesn't eliminate it. When you eventually sell without exchanging, the deferred gain becomes taxable. However, many investors continue exchanging indefinitely, building wealth on a fully tax-deferred basis for decades. There is also a strategy called "swap until you drop" — if you hold the property until death, your heirs receive a stepped-up basis and the deferred tax can be eliminated entirely.
Why Nevada for a 1031 exchange? ▼
Nevada currently does not impose an individual state income tax. That does not by itself determine the treatment of gain sourced to another state, residency, federal tax, or whether an exchange qualifies. A CPA or tax attorney should model the specific sale, ownership, residency, and replacement-property facts.
Go deeper

1031 exchange guides

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