Investor resources
1031 Exchange
Defer capital gains taxes when you sell one investment property and reinvest in another. Title Resources Inc. coordinates the title work and closing so your exchange stays on schedule.
The basics
What is a 1031 exchange?
A 1031 exchange, named after Section 1031 of the Internal Revenue Code, lets a real estate investor sell an investment property and reinvest the proceeds in another like-kind property while deferring capital gains taxes. Instead of paying taxes on the sale now, you keep more of your equity working for you in the next property.
The rules are strict. The properties must be held for investment or business use, the replacement property must be identified and purchased within firm deadlines, and the money must flow through a qualified intermediary rather than your own account. Working with an experienced closing team helps keep every requirement on track.
Key rules to know
- Like-kind property: Both the property you sell and the property you buy must be held for investment or productive business use. Most real estate held for investment qualifies as like-kind with other investment real estate.
- 45-day identification window: You have 45 days from the sale of your property to formally identify potential replacement properties in writing.
- 180-day closing deadline: The purchase of your replacement property must be completed within 180 days of the original sale. The 45 and 180 day clocks run at the same time.
- Qualified intermediary: You cannot touch the sale proceeds. A qualified intermediary holds the funds between the sale and the purchase and prepares the exchange documents.
- Equal or greater value: To fully defer taxes, the replacement property should be of equal or greater value, and all of the exchange proceeds should be reinvested.
The 1031 exchange process
Plan before you sell
Engage a qualified intermediary and your tax advisor before closing on the sale of your current property. The exchange must be set up in advance, so the sale proceeds never pass through your hands.
Sell your property
Close the sale of your relinquished property. The intermediary receives and holds the proceeds, and the title company handles the closing and records the transfer.
Identify replacements
Within 45 days, identify your potential replacement properties in writing. Investors commonly name up to three candidates so a backup is available if the first choice falls through.
Close within 180 days
Complete the purchase of the replacement property within 180 days of the original sale. Title Resources Inc. performs the title search, issues title insurance, and coordinates a smooth closing with your intermediary.
Frequently asked questions
What properties qualify for a 1031 exchange?
Real estate held for investment or productive business use qualifies, such as rental homes, commercial buildings, farmland, and vacant land held for investment. Your primary residence and property held mainly for resale do not qualify.
Can I use a 1031 exchange for my personal home?
No. A 1031 exchange applies only to property held for investment or business use. Primary residences have their own separate capital gains exclusion under different rules.
What happens if I miss the 45 or 180 day deadline?
The deadlines are firm. If you miss either one, the exchange fails and the sale becomes a taxable event. Starting the title work early and staying in close contact with your intermediary is the best protection.
What is a qualified intermediary and do I need one?
A qualified intermediary is an independent party who holds the sale proceeds and prepares the exchange documents. The IRS requires one for a standard deferred exchange. Your title company works alongside the intermediary at both closings.
What role does the title company play in a 1031 exchange?
The title company searches and insures title on both the property you sell and the property you buy, coordinates with the qualified intermediary so funds move correctly, and closes both transactions within your exchange deadlines.
Should I talk to a tax professional first?
Yes. A 1031 exchange has significant tax consequences, and this page is general information rather than tax or legal advice. Your CPA or tax attorney can confirm whether an exchange fits your situation before you list your property.
Bottom line
A 1031 exchange is one of the most powerful tools available to real estate investors, letting you defer capital gains taxes and keep your equity growing from one property to the next. Success comes down to planning ahead, meeting the 45 and 180 day deadlines, and surrounding yourself with the right team. Title Resources Inc. handles the title work and closings on both sides of your exchange so nothing slows you down.
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Real reviews from real closings
Don't take our word for it.
"Tracy was amazing throughout the entire process, super knowledgeable and super quick to respond. Closing was easy as it gets. Communication was quick and reliable!"
Daniel Maki
"Brian and the entire Title Resources team walked us through every step of the process when closing on our new home. Incredibly thorough, easy to get in touch with, and overall joyful to work with."
Lauren Curran
"Title Resources Inc kept us updated during the entire closing process. Very efficient and friendly. On closing day, they took the time to explain everything we were signing. I will definitely use them for my next real estate transaction."
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