Federal Section 1031 Like-Kind Exchange Calculator

How this calculator works

Section 1031 of the Internal Revenue Code permits a taxpayer to defer federal capital gains tax — together with depreciation recapture and the Net Investment Income Tax — on the exchange of real property held for productive use in a trade or business or for investment, for like-kind real property to be held for the same purpose. The deferred gain is not forgiven. It rolls into the basis of the replacement property under IRC § 1031(d), and surfaces if and when the replacement is eventually sold outright. The most consequential outcome of a chained § 1031 strategy is a step-up in basis at death under IRC § 1014, which wipes the deferred gain out of the federal tax base entirely.

This calculator models the federal-pure mechanics. It runs the realized-gain math, computes boot through three independent channels (cash retained outside the QI flow, mortgage net debt relief, and post-TCJA personal-property components), tests the 45-day identification and 180-day exchange deadlines under § 1031(a)(3), applies the substituted-basis carryover formula under § 1031(d), and approximates the tax on any recognized portion using the standard recapture-first sequencing under § 1(h)(6) and § 1411.

Post-TCJA scope: real property only

Before the Tax Cuts and Jobs Act of 2017 (Pub. L. 115-97), § 1031 covered both real and personal property. Aircraft, machinery, vehicles, artwork, and — under one IRS interpretation — cryptocurrency could be exchanged on a deferred basis. The TCJA restricted the section effective January 1, 2018, to real property only. Any personal property included in the relinquished sale or replacement purchase mix is fully taxable in the year of the exchange. This calculator treats personal-property value as boot — there is no path to deferral for the personal-property component, and the recognized gain on that piece feeds the tax stack on the recognized portion.

For real property, the IRS reads "like-kind" very broadly. Raw land for an apartment building. A Florida duplex for a Texas industrial warehouse. A 30-year leasehold for fee-simple ownership. The two properties just need to both be U.S. real property held for business or investment use. Primary residences (governed by IRC § 121 instead), inventory, dealer property, and partnership interests are excluded.

The 45-day and 180-day deadlines

IRC § 1031(a)(3) imposes two hard deadlines from the closing of the relinquished property: 45 calendar days to identify the candidate replacement property(ies) in writing to the qualified intermediary, and 180 calendar days to actually close on the replacement — OR the due date of the taxpayer's tax return for the year of the relinquishment (including any filing extension), whichever is earlier. Both clocks run on calendar days. There is no extension for weekends, holidays, hurricanes, or unique market conditions. The only material extension mechanism is a Presidentially-declared disaster relief notice under the pattern of IRS Notice 2008-91.

Missing either deadline disqualifies the exchange. The calculator surfaces this explicitly with a complianceFlags output: if the identification date supplied exceeds the 45-day window or the close date supplied exceeds the 180-day window, the exchange is marked DISQUALIFIED and the full realized gain is recognized — no cure, no partial credit.

The three identification methods under Treasury Regulation § 1.1031(k)-1(c)(4): (1) the THREE-PROPERTY RULE permits identification of up to three properties of any value, and is the workhorse method most exchanges use; (2) the 200% RULE permits identification of any number of properties whose aggregate fair market value does not exceed 200% of the relinquished property's sale price; (3) the 95% RULE permits identification of any number exceeding the 200% cap, but only if the taxpayer ultimately acquires properties whose aggregate FMV is at least 95% of the total identified FMV — failure to hit 95% disqualifies the entire exchange. The 95% rule is brutal and is almost never used; the 3-property rule is the safe default for most exchanges.

The qualified intermediary requirement

Treasury Regulation § 1.1031(k)-1(g)(4) provides a safe harbor: if the taxpayer never has actual or constructive receipt of the sale proceeds, the exchange qualifies. The QI is the operational mechanism for staying inside the safe harbor. The QI takes assignment of the purchase-and-sale agreements for both transactions, holds the proceeds from the relinquished sale, and disburses to the replacement-property seller at the second closing. The QI cannot be the taxpayer, the taxpayer's spouse or related party, the taxpayer's attorney, accountant, real-estate broker, or any other agent who has acted for the taxpayer in the prior two years (the "disqualified person" rule).

QI fees on a standard delayed exchange typically run $700 to $1,500. Reverse exchanges — where the replacement property is acquired before the relinquished is sold, under the safe harbor of Rev. Proc. 2000-37 — run $5,000 to $10,000 or more, because they require an Exchange Accommodation Titleholder to hold one of the properties for the interim period.

Boot recognition: three channels

Boot is anything received in the exchange that is not like-kind real property. The calculator models three independent boot channels and sums them into a single recognized-gain figure (capped at the realized gain).

Cash boot. Cash retained by the taxpayer outside the QI flow. Typically arises when the replacement property is cheaper than the relinquished property and the QI returns the surplus to the taxpayer at the end of the exchange. Cash boot is taxable in the year of the exchange up to the amount of realized gain.

Mortgage (net debt-relief) boot. Under Treasury Regulation § 1.1031(d)-2, when the relinquished-property mortgage paid off exceeds the replacement-property mortgage assumed, the net debt relief is treated as boot. The math is straightforward: mortgageBoot = max(0, relinquishedDebtRelieved − replacementNewDebt). The IRS does NOT give offsetting basis or deduction when the reverse happens (replacement debt exceeds relinquished debt); there is simply no mortgage boot in that case.

Personal-property boot. Post-TCJA, any personal-property component included in the exchange mix is fully taxable. This calculator treats personalPropertyValue as boot dollar-for-dollar.

The total boot is the sum of the three channels, capped at realized gain. The recognized gain (the taxable portion) equals the total boot when the exchange qualifies, or the full realized gain when the exchange is disqualified.

Worked example 1: full deferral

A real-estate investor sells a $1,000,000 building with $400,000 adjusted basis and a $500,000 mortgage. The investor buys a $1,200,000 replacement with $1,000,000 of new mortgage debt.

• Realized gain: $1,000,000 − $400,000 = $600,000.
• Mortgage boot: max(0, $500,000 − $1,000,000) = $0 (debt up, not down — no boot).
• Cash boot: $0.
• Personal-property boot: $0.
• Total boot: $0.
• Recognized gain: $0.
• Deferred gain: $600,000.
• New basis: $400,000 + $1,000,000 − $500,000 + $0 − $0 = $900,000.

The full $600,000 gain is deferred. The replacement property carries a $900,000 basis instead of its $1,200,000 purchase price — exactly $300,000 lower, which reflects the $600,000 deferred gain partially offset by the $300,000 of new equity contributed via the larger new mortgage.

Worked example 2: trade-down with cash boot

Same starting facts: $1,000,000 sale, $400,000 basis, but the investor buys an $800,000 replacement with no mortgage. The investor receives $200,000 of cash boot from the QI at the end of the exchange (the surplus that did not get reinvested).

• Realized gain: $600,000.
• Cash boot: $200,000.
• Mortgage boot: $0 (no debt on either side after the assumed payoff).
• Total boot: $200,000.
• Recognized gain: min($200,000, $600,000) = $200,000.
• Deferred gain: $600,000 − $200,000 = $400,000.

The $200,000 of cash boot is taxable in the year of the exchange; the $400,000 remainder rolls forward as deferred gain in the replacement basis.

Worked example 3: missed 45-day identification

Same starting facts as Example 1 — $1,000,000 sale, $400,000 basis, $600,000 realized gain. The investor closes the relinquished sale on March 1. The 45-day identification deadline is April 15. The investor delivers identification to the QI on May 1 — 16 days late.

• Realized gain: $600,000.
• Identification compliance: MISSED.
• Exchange qualifies: NO.
• Recognized gain: $600,000 (full recognition).
• Deferred gain: $0.

There is no cure. The full $600,000 gain is taxable in 2026. At a 15% LTCG approximation with 3.8% NIIT, the federal tax bill is approximately $90,000 + $22,800 = $112,800 — a hard lesson on the 45-day window.

Worked example 4: depreciation recapture on recognized boot

Same Example 2 facts ($1,000,000 sale, $400,000 basis, $200,000 cash boot), but the investor has $100,000 of accumulated depreciation on the relinquished property.

• Realized gain: $600,000.
• Recognized gain: $200,000.
• Recapture base: min($100,000, $200,000) = $100,000.
• Depreciation recapture tax: $100,000 × 25% = $25,000.
• Remaining gain after recapture: $200,000 − $100,000 = $100,000.
• LTCG approximation at 15%: $100,000 × 15% = $15,000.
• NIIT at 3.8%: $200,000 × 3.8% = $7,600.
• Total federal tax on recognized portion: approximately $47,600.

The recapture-first sequencing matters: the IRS taxes the first dollars of boot at the 25% unrecaptured § 1250 rate up to the cumulative depreciation amount, then at LTCG rates on the remainder. Even small amounts of boot can carry a disproportionately high tax bill on heavily-depreciated properties — the fix is to structure for full deferral whenever the depreciation overhang is large.

Drop-and-swap, DST, and reverse exchanges

A few advanced techniques worth knowing about (though this calculator models only the standard delayed exchange):

Drop-and-swap. When a partnership holds the relinquished property and the partners want different post-exchange outcomes, the partnership distributes the property to the partners as tenants-in-common BEFORE the sale (the "drop") and each partner then exchanges their TIC interest for separate replacement property (the "swap"). The IRS sometimes challenges the hold-period of the TIC interest; Rev. Proc. 2002-22 provides a TIC safe harbor.

Delaware Statutory Trust (DST) as replacement. Under Rev. Rul. 2004-86, a DST satisfying the "Rev. Rul. 2004-86 factors" is treated as a grantor trust, and a fractional beneficial interest is treated as a direct interest in the underlying real property for § 1031 purposes. DSTs are useful for investors who want deferral but not management burden — typical sponsors aggregate institutional-grade properties at $25K-$100K minimums. The trade-offs are illiquidity, sponsor risk, and limited upside.

Reverse exchange. Under Rev. Proc. 2000-37, the taxpayer acquires the replacement property FIRST and sells the relinquished property within 180 days. Useful when the replacement is uniquely available or the sale cannot close quickly. Requires an Exchange Accommodation Titleholder to take title to one of the properties for the interim period, at $5,000-$10,000+ in additional fees.

§ 121 + § 1031 combination on converted properties

Under Rev. Proc. 2008-16, a property that has been converted between primary-residence and investment use can claim both § 121 and § 1031 in sequence. The classic pattern: live in the property for 2+ years (qualifying for the § 121 $250K single / $500K MFJ exclusion), convert it to a rental for 2+ years (qualifying for § 1031), and sell via a § 1031 exchange. The § 121 exclusion applies to the residence-period portion of the gain, and § 1031 defers the remaining rental-period gain into the replacement property. The reverse pattern also works — rent first, then convert — subject to the IRC § 121(b)(5) non-qualified-use proration for the rental years (see the companion § 121 calculator).

Common errors

The single most common failure mode in real-world § 1031 exchanges is constructive receipt of the proceeds. The taxpayer or the taxpayer's agent touches the cash, even briefly, between the two closings — the deferral is lost. The fix is structural: a properly engaged QI takes title (or assignment) and the taxpayer never has access to the funds.

The second is missing the 45-day identification. The 180-day window gets all the attention but is generous. The 45-day window is brutal — a month and a half from the day the relinquished property closes. The professional defense is to identify aggressively (up to three properties under the 3-property rule, even ones unlikely to close) and to identify EARLY in the window so any late-breaking issue with a candidate property does not leave the taxpayer scrambling on day 44.

The third is miscalculating the 200% rule. Investors sometimes identify a long list of candidates without checking whether their aggregate FMV exceeds 200% of the relinquished sale price. If it does, the 95% rule kicks in, and the taxpayer must acquire 95% of the identified FMV or the entire exchange fails. Better to stay under three identifications or under the 200% ceiling.

The fourth — newly relevant post-TCJA — is assuming personal property still qualifies. Aircraft, machinery, vehicles, and intellectual property exchanges no longer qualify for deferral. Any personal-property value in the exchange mix is taxable as boot.

What this calculator does not do

This is a planning and screening tool. It does NOT substitute for a qualified intermediary engagement under Treas. Reg. § 1.1031(k)-1(g)(4) — the QI is structural. It does NOT cover reverse exchanges, improvement exchanges, or related-party restrictions under IRC § 1031(f). It does NOT cover state-level conformity issues that arise in high-tax states. It applies only to U.S. real property under post-TCJA scope. The tax approximations on recognized gain use a placeholder 15% LTCG rate and assume MAGI above the § 1411 NIIT threshold — the user's actual federal tax may differ depending on bracket position.

How this page is maintained

The § 1031 framework has been stable since TCJA 2017 restricted the section to real property. The 45-day and 180-day windows, the boot recognition rule, the substituted-basis formula, and the QI safe harbor have not changed. The unrecaptured § 1250 rate (25%) and the NIIT rate (3.8%) have been unchanged since their respective enactments (1997 and 2013). We monitor IRS guidance for procedural updates and refresh the calculator after each material change.

Last reviewed: 2026-05-15 against IRC § 1031 (full section), IRC § 1031(a)(3) (45/180-day windows), IRC § 1031(b) (boot), IRC § 1031(d) (basis carryover), IRC § 1031(f) (related-party), IRC § 1(h)(6) and § 1250 (25% recapture), IRC § 1411 (NIIT), Treas. Reg. § 1.1031(k)-1 (delayed exchange + QI safe harbor), Treas. Reg. § 1.1031(d)-2 (debt-relief boot), Rev. Proc. 2000-37 (reverse exchanges), Rev. Proc. 2008-16 (§ 121 + § 1031 safe harbor), IRS Form 8824 (reporting), IRS Publication 544 (plain-English guide), and the Tax Cuts and Jobs Act of 2017 (Pub. L. 115-97).