Section 1031 Like-Kind Exchange Tax Deferral Calculator
Calculate federal capital gains, 25% depreciation recapture, 3.8% NIIT, and state income taxes deferred in a real estate Section 1031 exchange.
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Frequently Asked Questions
What is an IRS Section 1031 Like-Kind Exchange?
Internal Revenue Code Section 1031 allows real estate investors to sell an investment or business property and reinvest the net proceeds into a new replacement property of equal or greater value, deferring 100% of federal and state capital gains and depreciation recapture taxes.
What are the 45-day and 180-day strict 1031 exchange deadlines?
Investors have exactly 45 calendar days from the sale of the relinquished property to officially identify up to 3 candidate replacement properties in writing. You have exactly 180 calendar days (or until your tax return due date) to complete the closing acquisition of the replacement property.
What is depreciation recapture tax and how does a 1031 exchange defer it?
During ownership, commercial and residential landlords depreciate buildings (27.5 or 39 years) to offset rental income. Upon regular sale, the IRS recaptures this depreciation at a flat 25% tax rate. A 1031 exchange completely rolls over and defers this 25% liability into the replacement property's basis.
What happens to deferred 1031 exchange taxes upon the owner's death?
Under the current IRS 'step-up in basis' rule (IRC Section 1014), when the owner dies, their heirs inherit the real estate at current fair market value, permanently wiping out all lifetime deferred capital gains and depreciation recapture taxes ('Swap 'til you drop').