Yes, you can absolutely do a 1031 exchange on land. Under Section 1031 of the Internal Revenue Code, real property held for productive use in a trade or business or for investment can be exchanged for other real property of like-kind, and this includes land. The key requirement is that both the relinquished property (the land you are selling) and the replacement property (the property you are acquiring) must be held for investment or business purposes.

The term "like-kind" is quite broad when it comes to real estate. According to Section 1.1031(a)-1 of the Income Tax Regulations, the nature or character of the property is what matters, not its grade or quality. This means that you can exchange unimproved land for improved land, or even for a different type of real estate, such as a commercial building, as long as both properties are held for investment or business use.

Here's an example to illustrate how a 1031 exchange on land might work, using Deferred.com as your qualified intermediary:

1. Engage Deferred.com: You would first engage us at Deferred.com to act as your qualified intermediary. This is crucial because it ensures that you do not have constructive receipt of the funds from the sale of your land, which would otherwise trigger a taxable event.
2. Sell the Land: You sell your land for $300,000. The proceeds from this sale are transferred to Deferred.com, who holds them in escrow.
3. Identify Replacement Property: Within 45 days of selling your land, you must identify potential replacement properties. In this case, you identify a commercial property worth $400,000.
4. Acquire Replacement Property: Within 180 days of selling your land, you must close on the purchase of the replacement property. Deferred.com uses the $300,000 held in escrow to help fund the purchase of the commercial property. You would need to cover the additional $100,000, either through cash or financing.
5. Complete the Exchange: Once the transaction is complete, you have successfully exchanged your land for a commercial property without recognizing the $200,000 gain for tax purposes at this time.

By using Deferred.com as your qualified intermediary, you ensure that the transaction is structured correctly to meet the requirements of a 1031 exchange, allowing you to defer capital gains taxes and reinvest the full value of your original investment into a new property. This strategy can be a powerful tool for real estate investors looking to grow their portfolios while deferring taxes.