Trade up without cashing out.
When you sell investment or business real estate at a profit, the gain is taxable. A 1031 exchange lets you defer that bill by rolling the equity into another property of like kind instead of handing a share of it to the IRS.
Nearly every exchange takes one of two shapes: a direct trade of one property for another, or a sale to one buyer followed by a purchase from an unrelated seller. Unless both closings happen simultaneously, the law requires a qualified intermediary to hold the proceeds in between.
Worth being clear about: this is a deferral, not forgiveness. Your original cost basis follows you into the replacement property, and the tax comes due whenever you finally sell without exchanging again.
- The core rule
- You may never take possession of the proceeds
- The two clocks
- 45 days to identify, 180 days to close
- Where the money sits
- A segregated account at a Texas bank
Equity that keeps working.
Defer the tax
Capital gains and depreciation recapture stay invested in real estate instead of leaving at the closing table.
Buy more property
Reinvesting the whole proceeds rather than the after-tax remainder means a larger down payment and a bigger replacement property.
Change what you own
Trade one property for several or several for one. Move markets, change asset types, or shed the management headache.
Pass it on
Exchanges can be repeated for decades, and heirs may take a stepped-up basis that erases the deferred gain entirely.
Where Austin 1031 comes in.
An exchange has to be built correctly from the start. The IRS will not let you take possession of the sale proceeds — not for a week, not for an afternoon — or the exchange fails and the gain is taxable. Someone has to stand between you and the money, and that someone cannot be you or anyone acting as your agent.
That is the job. As your qualified intermediary we prepare the exchange agreement, send instructions to the title company, and hold the proceeds in a segregated account between your two closings. When you are ready to buy, we release the funds to the closing and the replacement property is deeded straight to you.
Because we are local, the money stays in a Texas bank and the person who answers your first call is the person who wires it.
Meet the team →Both clocks start the day your sale closes. They run at the same time, they count calendar days, and the IRS does not grant extensions outside a declared disaster.
Four things to get right.
Like-kind, held for investment
Almost any U.S. real estate held for business or investment qualifies — raw land for an apartment building, a rent house for a retail strip. The home you live in does not.
Same taxpayer on both sides
Whoever sold the relinquished property has to take title to the replacement. If an LLC sold it, the same LLC buys. Mismatches break the exchange.
Identification limits
Within 45 days you may name up to three properties at any price, or more under the 200% rule. What you buy has to come off that list.
Equal or greater value
To defer the whole gain, reinvest all the proceeds and carry equal or greater debt. Whatever you hold back — cash or debt relief, called boot — is taxable.
1031 exchanges, answered.
Do I have to use a qualified intermediary?
For any exchange that is not simultaneous, yes. You cannot receive or control the proceeds yourself at any point, and the intermediary has to be engaged before your sale closes. Afterward is too late.
What kind of property qualifies?
Real property held for investment or used in a trade or business: rent houses, commercial buildings, raw land, farm and ranch acreage. Your homestead and property held mainly for resale generally do not qualify.
What if I miss the 45- or 180-day deadline?
The exchange usually fails and the gain becomes taxable that year. The dates are not extendable except in limited federally declared disaster situations, which is exactly why we calendar them with you from day one.
Can I buy property outside Texas?
Yes. Replacement property can be anywhere in the United States. We regularly coordinate with out-of-state title companies and closing attorneys.
What does an exchange cost?
A standard forward exchange carries a flat intermediary fee, generally paid as a closing expense and small next to the tax being deferred. Reverse and construction exchanges take more work and cost more. We quote your situation before you commit.
Have a sale on the horizon?
The best time to set up an exchange is before you sign the contract. Let’s talk through your options while you still have all of them.
No charge for the call.