BlueLion 1031

Reference

1031 Exchange Reference

A chapter-by-chapter reference on section 1031 exchanges, in twelve parts with notes to the statute, regulations, rulings and cases. It is general information, not tax or legal advice.

Reviewed by Nicholas A. Henault, Esq. on October 23, 2026. This reference is general information about section 1031, not tax or legal advice for your transaction. Talk to your own tax adviser or attorney before you rely on it.

How to use it

Start with the guides for a plain answer to a common question. Use the reference when you need the rule itself, the source it comes from and the edge cases around it. The glossary in Appendix E defines the terms of art, and a chapter that a guide draws on ends with a link to that guide.

Part IThe theory of nonrecognition

  1. 1Realization and the Income Tax BaseThis chapter establishes why an exchange of property is a taxable event at all, why the tax law waits for a transaction before measuring...
  2. 2Nonrecognition as a Structural DeviceThis chapter asks why the Code contains provisions of that kind at all, and what section 1031 shares with the other provisions...
  3. 3The Economics of DeferralThis chapter prices the loan. It measures the effective tax rate that deferral produces, explains the options that a realization system...

Part IIHistorical development

  1. 4Statutory Origins, 1921-1954This chapter traces the text from the statute that preceded it through the 1954 recodification, relying on the Statutes at Large...
  2. 5The Deferred Exchange ProblemFor more than sixty years the like-kind rule said nothing about time.
  3. 6Anti-Abuse Accretion, 1989-2004The next fifteen years added limits and permissions at its edges. Congress enacted the related-person rules of section 1031(f) in 1989.
  4. 7The 2017 Restriction to Real PropertyThis chapter examines the amendment, its transition rule, the personal property practice it ended, and the expanded expensing...
  5. 8The Modern Regulatory SettlementThis chapter traces that rulemaking: what the proposal would have done, why the final regulations abandoned its central limitation...

Part IIIStatutory architecture and interpretive method

  1. 9The Anatomy of ยง1031Section 1031 now has eight subsections. This chapter reads them together: the general rule and its conditions, the rules for exchanges...
  2. 10The Regulatory SchemeThis chapter maps them: what each section does, when it was written, and which still govern exchanges today.
  3. 11Interpretive MethodologyAnswering an exchange question means deciding what counts as law and how much each source weighs.

Part IVThe property requirement

  1. 12Held for Productive Use or for InvestmentThis chapter addresses the holding requirement alone. Its central lesson is that the qualifying purpose is defined negatively rather...
  2. 13Excluded PropertyBefore 2018 the statute carried a list. Section 1031(a)(2) enumerated six categories of property to which nonrecognition did not apply...
  3. 14Defining Real PropertyWhen the Tax Cuts and Jobs Act confined nonrecognition to real property, a definitional question that had been peripheral became the gate...
  4. 15The Like-Kind StandardThe exchanged properties must be of like kind. For personal property before 2018 this was a demanding test, administered through asset...
  5. 16Real Property Interests at the MarginsThis chapter takes up the interests that do present something harder: rights carved out of land, rights above and below it, rights...
  6. 17Incidental Personal PropertyReal property does not transfer alone. An apartment building comes with appliances, a hotel with furniture and linens, a restaurant...

Part VThe taxpayer requirement

  1. 18The Same-Taxpayer DoctrineThe requirement is easy to state and surprisingly difficult to locate in the statute. This chapter derives it, identifies the variations...
  2. 19Entity ClassificationThis chapter supplies the machinery that makes the distinction operational, because whether a given entity is a taxpayer at all...
  3. 20PartnershipsThe partnership can exchange, but a partnership can only exchange into one thing, and the partners want three.
  4. 21Co-Ownership StructuresThe two vehicles are the tenancy in common and the Delaware statutory trust. Each is governed by a single piece of administrative...
  5. 22Trusts, Estates, and FiduciariesA fiduciary who executes a technically valid exchange may still have breached a duty, and a fiduciary who declines a valid exchange may...

Part VITransactional structures

  1. 23The Simultaneous ExchangeThe simultaneous exchange is the transaction section 1031 was written for, and it is now the rarest form in practice.
  2. 24The Deferred ExchangeThis chapter establishes what a deferred exchange is, what disqualifies one, and how the paperwork accomplishes the result.
  3. 25IdentificationThe identification requirement is the most rule-bound provision in section 1031 and the one that produces the most failures.
  4. 26The Exchange PeriodThe exchange period is the simpler of the two deadlines and the one more often lost for a reason having nothing to do with time.
  5. 27The Safe HarborsParagraph (g) of the deferred exchange regulation sets forth four safe harbors, the use of which will result in a determination...
  6. 28Disqualified PersonsThis chapter supplies the definition, which is mechanical, unforgiving, and among the easiest provisions in the regulation to violate...
  7. 29Receipt, Agency, and ControlParagraph (f) of the deferred exchange regulation states the rules that apply when a harbor is unavailable, and it is short, blunt...
  8. 30Reverse ExchangesThis chapter sets out why the statute supplies no answer, what the administrative safe harbor does and does not accomplish...
  9. 31Improvement and Build-to-Suit ExchangesA taxpayer with substantial proceeds and no suitable replacement property frequently wants to build one.
  10. 32Multi-Asset and Composite ExchangesA taxpayer sells three buildings and buys one, or sells one and buys four, or transfers a portfolio in which some assets qualify and some do not.

Part VIIQuantification

  1. 33BootThis chapter establishes what counts as boot, how much gain it causes to be recognized, how the offsetting rules work, what rate applies...
  2. 34LiabilitiesDebt is where exchanges go wrong quietly. Cash boot announces itself, because the taxpayer receives money and knows it.
  3. 35BasisDeferral is not forgiveness, and basis is where the deferred gain goes.
  4. 36Depreciation After an ExchangeA taxpayer who exchanges a building held for thirty years does not get a fresh thirty nine year recovery period on the carryover basis.
  5. 37RecaptureDepreciation converts a capital investment into ordinary deductions. Recapture is the system's way of taking the character back...
  6. 38Holding PeriodThe holding period of replacement property is the shortest topic in this Part and the one most often confused with something else.
  7. 39Worked ComputationsThis chapter closes Part VII by running the rules of Chapters 33 through 38 through five complete transactions.

Part VIIIRelated parties and anti-abuse

  1. 40Section 1031(f)An exchange between related persons is not prohibited. It is conditional, and the condition runs for two years after the transaction...
  2. 41Intermediated Related-Party ExchangesThis chapter sets out why, and identifies the narrow circumstances in which acquiring replacement property from a related person still works.
  3. 42Judicial Anti-Abuse DoctrinesThey have no safe harbors, no elections, and no deadlines, and they operate on transactions that satisfy every explicit requirement...

Part IXIntersections with the wider code

  1. 43Principal Residences and Section 121Section 121 excludes gain permanently. Section 1031 defers it.
  2. 44Installment Reporting and Section 453Section 453 is the provision practitioners reach for when an exchange goes wrong, and it is the reason a taxpayer contemplating a sale...
  3. 45Involuntary Conversions and Section 1033When a client's property is condemned, the reflex is to reach for section 1031. That is usually the wrong instrument.
  4. 46The Estate Planning EndgameThis chapter takes up the fact that makes the deferral permanent for most taxpayers who use it, and it is not in section 1031 at all.
  5. 47Opportunity Zones ComparedThe two regimes are constantly presented as alternatives, and they are, but not in the way the comparison is usually drawn.
  6. 48Cross-Border DimensionsTwo questions arise when an exchange crosses a border, and they are unrelated to each other.
  7. 49Other Interacting ProvisionsFour provisions outside subchapter O affect the economics of nearly every exchange, and none of them is mentioned in section 1031...
  8. 50Partnership Tax InteractionsIt sets out the provisions that actually operate in exchange transactions and identifies where each of them bites.
  9. 51Creditors, Insolvency, and BankruptcyA taxpayer who has exchanged repeatedly holds property with a basis far below its debt, and that combination is exactly what makes...

Part XPractice, procedure, and risk

  1. 52DocumentationThis chapter collects the drafting requirements that are scattered across the regulation and organizes them by document.
  2. 53ReportingThis chapter sets out the form, the situations that complicate it, and the elections that can still be salvaged after the fact.
  3. 54Examination and LitigationThis chapter sets out how that examination proceeds, who bears the burden, how long the exposure lasts, and what the failure costs.
  4. 55The Intermediary IndustryThis chapter takes up that gap: what the federal rules require, what happened when the gap was tested, what a minority of States...
  5. 56Professional ResponsibilityTwo bodies of rules govern a lawyer in an exchange, and they are not the same rules.

Part XIState and subnational treatment

  1. 57Conformity and NonconformityA taxpayer also pays tax to one or more States, and whether a State honors the federal deferral is a separate question with a separate answer.
  2. 58Clawback Regimes and Continuing ReportingA taxpayer who exchanges out of a State, or moves away from one, often assumes the first State's claim ends there. Several States say otherwise.
  3. 59State Withholding on DispositionsStates impose their own withholding on dispositions by persons who are not residents of the State, and a nonresident for this purpose...
  4. 60Transfer, Recordation, and Documentary TaxesSection 1031 defers income tax. It does nothing about the taxes imposed on transferring title or recording a deed, and those taxes...
  5. 61Maryland: A Jurisdictional Case StudyThis chapter assembles the Maryland rules scattered through Parts IX, X, and XI into the order a Maryland transaction actually meets them.

Part XIIPolicy, empirics, and reform

  1. 62Revenue EstimationThis chapter explains where the official numbers come from, why the two federal estimators long disagreed...
  2. 63The Empirical LiteratureThis chapter organizes the literature by question, identifies who funded what, and marks the questions the studies leave open.
  3. 64Reform ProposalsProposals to change section 1031 fall into five families: repeal it, cap it, narrow it by type of property or class of taxpayer, keep...
  4. 65Comparative PerspectivesThis chapter examines three common-law systems, the United Kingdom, Ireland, and Canada, and two civil-law systems, Germany and Japan.
  5. 66Unsettled QuestionsThis chapter collects five questions on which the authorities conflict, are silent, or have been unsettled by recent decisions.

AppendicesTables, glossary and worksheets

  1. AChronology of Statutes, Regulations, and RulingsThis chronology lists in date order the statutes, regulations, and administrative guidance that shaped section 1031.
  2. BTable of CasesThis table lists the judicial decisions, and the decisions of state tax tribunals, that are cited or discussed in Chapters 1 through 66.
  3. CTable of Statutes, Regulations, and Legislative MaterialsThis table lists the statutes, regulations, bills, and congressional documents cited in the notes to Chapters 1 through 66...
  4. DTable of Administrative GuidanceThis table lists the administrative materials cited in the notes to Chapters 1 through 66, with the sections whose notes cite each one.
  5. EGlossary of Terms of ArtThis glossary defines the terms of art used in the treatise.
  6. FComputation Worksheets and TimelinesThis appendix sets out the recurring computations and deadlines of exchange practice in a form that can be worked line by line.

Guides in plain language are at 1031 exchange guides. To open an exchange, go to start an exchange or call (410) 863-1555.

Reviewed byNicholas A. Henault, Esq.Managing Director of BlueLion 1031 and a Maryland attorney whose practice covers real estate and real estate tax planning. University of Maryland School of Law; Cornell University. Full bio