The 1031 Exchange, Explained for Beach Investors

A 1031 exchange lets an investor sell one investment property and buy another while deferring the capital gains tax on the sale. The rules are strict, and most of the risk sits in two deadlines.

The two deadlines

Both clocks start the day your sale closes.

• Identification: 45 days to name replacement properties in writing
• Closing: 180 days to close on the replacement, or your tax return due date for that year if it comes first

The two clocks run at the same time, so the 45 days count toward the 180. Both run in calendar days, and weekends and holidays count. Source: IRS, like-kind exchanges.

This is a general overview, not tax advice. Talk to your tax advisor or a qualified intermediary before you sell.

Lining up the replacement

The hardest part is usually finding the right property in time. On the coast, that means knowing which buildings allow the rental strategy you plan to use before you identify them.

Who does what

1. Your qualified intermediary holds the sale proceeds.
2. Your tax advisor confirms the exchange qualifies.
3. Your broker finds and negotiates the replacement.

Use the 1031 timeline calculator to map your dates, or browse invest on the beach for options.