Question 1

What is a 1031 exchange?

Accepted Answer

A 1031 exchange (named after IRC Section 1031) lets you sell an investment property and defer capital gains tax by reinvesting the proceeds into a like-kind replacement property. Both properties must be held for investment or business use — personal residences do not qualify.

Question 2

What is boot in a 1031 exchange?

Accepted Answer

Boot is the portion of exchange proceeds not reinvested into the replacement property. If you receive cash back or trade into a less expensive property, the un-reinvested amount is taxable boot. To defer the full capital gain, you must reinvest all equity and acquire a property of equal or greater value.

Question 3

What are the time limits for a 1031 exchange?

Accepted Answer

You have 45 calendar days from the sale of your relinquished property to identify potential replacement properties, and 180 calendar days to close on the replacement. A qualified intermediary must hold the proceeds — you cannot touch the money directly.

1031 Exchange Calculator

Current Property

Replacement Property

Projections

Tax Deferred

Extra Equity via 1031

Boot (Taxable)

Capital Gain

Cash Flow Comparison: 1031 vs Taxable Sale

Year-by-Year Projection