Frequently asked questions

A 1031 exchange lets a real estate investor sell an investment property and reinvest the proceeds into new investment property while deferring capital gains taxes. The name comes from Section 1031 of the Internal Revenue Code. Instead of paying tax on your gain in the year of the sale, the full amount stays invested and keeps working in your portfolio: in a larger property, more properties, or a strategically better one. It is one of the most powerful wealth-building tools available to real estate investors.

Before your sale closes, 1031 QualEx puts the exchange agreement in place and coordinates with your closing agent so the exchange is properly documented. At closing, your proceeds transfer directly into a segregated exchange account; they never pass through your hands, which is what preserves the deferral. You then have 45 days to identify replacement property in writing and 180 days to close on it. We fund the replacement purchase from your exchange account and give you complete records for your tax preparer.

The Qualified Intermediary (QI) is the independent party the IRS requires between you and your money during an exchange. The QI prepares the exchange documents, coordinates with closing agents on both transactions, holds the sale proceeds for your benefit, disburses funds to purchase your replacement property, returns any unused funds at the end of the exchange period, and keeps the records that document the exchange for your tax return. At 1031 QualEx, your funds are held in a segregated account, never pooled with other clients' money.

The IRS disqualifies anyone who has acted as your agent within the past two years (including your attorney, CPA, or real estate agent) from serving as your Qualified Intermediary. Beyond the legal requirement, exchanges run on strict deadlines and precise paperwork, which is why it matters that your intermediary does this full-time. 1031 QualEx is an attorney-run QI with no other corporate ties, dedicated exclusively to exchanges, not an accounting firm or law office doing exchanges on the side.

Almost all real estate held for investment or business use qualifies: rental houses, apartment and commercial buildings, farms, and vacant land. Your primary residence does not qualify. Many owners are surprised by how broad 'investment property' is: a small farm or inherited acreage usually counts. If a property mixes personal and investment use, like a home on acreage, the two portions can typically be valued separately, with the investment portion eligible for exchange.

For modern 1031 exchanges, all U.S. real estate held for investment is like-kind to all other U.S. real estate. You can exchange vacant land for an apartment complex, a rental house for a retail center, or a farm for an office building. Like-kind does not mean same type. What doesn't qualify: exchanging real estate for stocks, bonds, or other non-real-estate assets, and since 2018, personal property such as equipment or vehicles no longer qualifies at all.

Yes. We facilitate 1031 exchanges for property in all 50 states. Our office is in Fayetteville, Arkansas, and because exchange documents can be e-signed and closings coordinated remotely, where the property sits makes no practical difference.

Two deadlines, both counted from the day your sale closes: 45 calendar days to identify replacement property in writing, and 180 calendar days to close on it. Both are fixed by statute: weekends and holidays count, and the IRS does not grant extensions. One nuance: the exchange must also finish by your tax return due date for the year of sale, so late-year sales sometimes need a filing extension to get the full 180 days. We track every date and send automatic notices so nothing arrives unannounced.

Your gain is roughly the sale price, minus selling costs, minus your adjusted cost basis. The adjusted basis starts at what you paid, increases with capital improvements, and decreases with every year of depreciation claimed, which is why long-held rentals often carry larger taxable gains than owners expect. For most real estate investors, long-term gains are taxed at 15% or 20%, plus depreciation recapture at up to 25%. A 1031 exchange defers all of it.

Yes. The standard rule lets you identify up to three replacement properties at any combined value and purchase any or all of them. If you need a longer list, the 200% rule allows more than three identifications as long as their combined value stays within 200% of what you sold. Exchanging one property into several, or several into one, are both common strategies.

A 1031 exchange defers tax; it doesn't erase it. The deferred gain carries into your new property's basis and comes due if you eventually sell without exchanging. But deferral can be repeated indefinitely as you trade up, and under current law, heirs receive a stepped-up basis at death, meaning the deferred gain can ultimately never be taxed. Investors call this 'swap till you drop.' Your tax advisor can model how it applies to your estate.

A reverse exchange flips the usual order: you acquire your replacement property first and sell your existing property afterward, with the same tax deferral. An exchange accommodation titleholder 'parks' the new property while your sale completes, under IRS Revenue Procedure 2000-37. Reverses require more structure and planning than a forward exchange; many intermediaries won't take them on. They are a core part of our practice.

Before your sale closes, ideally as soon as you're considering selling. The exchange must be in place before closing, and early conversations open up options (like reverse or improvement structures) that get harder later. The initial conversation is free: a ten-minute call is usually enough to know whether an exchange fits your situation. We routinely set up exchanges on rush timelines, but you'll always get better options by calling early.