What happens when you sell a 1031 exchange property after?
What are the tax implications and considerations when selling a property that was previously acquired through a 1031 exchange?
Can a 1031 exchange be conducted between properties located in different states, or must both the relinquished and replacement properties be situated within the same state to qualify for tax deferral under Section 1031 of the Internal Revenue Code?
A 1031 exchange does not require the properties involved to be in the same state. The key requirement for a 1031 exchange is that the properties must be “like‐kind,” which refers to the nature or character of the property, not its location. This means you can exchange real estate in one state for real estate in another state, as long as both properties are held for productive use in a trade or business or for investment purposes.
The concept of “like‐kind” is quite broad when it comes to real estate. For example, you could exchange a rental property in California for a commercial building in Texas, or a piece of undeveloped land in Florida for an apartment complex in New York. The geographic location of the properties does not affect their eligibility for a 1031 exchange.
To illustrate this with an example, let’s say you own a rental property in Oregon that you purchased for $300,000. Over the years, the property’s value has appreciated, and it’s now worth $500,000. You decide to sell this property and use the proceeds to purchase a commercial property in Arizona, which is also valued at $500,000.
Here’s how the 1031 exchange process would work with Deferred.com as your qualified intermediary:
By using Deferred.com as your qualified intermediary, you benefit from our No Fee Exchange service, saving you money on the transaction. This example demonstrates that the location of the properties in different states does not impact the eligibility for a 1031 exchange, as long as the properties are like‐kind and the exchange is structured correctly.
Have more questions? Call us at 866-442-1031 or send an email to support@deferred.com to talk with an exchange officer at Deferred.
See more frequently asked questions about 1031 exchanges
What are the tax implications and considerations when selling a property that was previously acquired through a 1031 exchange?
In a 1031 exchange, who is responsible for holding the proceeds from the sale of the relinquished property to ensure compliance with IRS regulations and to facilitate the acquisition of the replacement property?
In the context of a 1031 exchange, who is considered the "exchanger," and what role do they play in the process of deferring capital gains taxes through the exchange of like-kind properties?
How do I accurately report a 1031 exchange on my tax return to ensure compliance with IRS regulations and achieve the intended tax deferral benefits?
Is it permissible to rent out a property acquired through a 1031 exchange to a family member, and if so, are there specific conditions or limitations that must be met to ensure compliance with IRS regulations and maintain the tax-deferred status of the exchange?

A 1031 exchange allows real estate investors to sell a property and reinvest the proceeds into a new purchase and defer capital gains taxes. We dive deep into tax deferred like-kind exchanges, covering how 1031 exchanges work, the rules and timelines, and when it makes sense to do an exchange.

A 1031 exchange can be an incredible tool for real estate investors to reduce their tax liability. We demystify the rules required to qualify and successfully complete a like-kind exchange.

The 1031 Exchange is a great way for businesses and investors to take advantage of the additional value of their real estate and put it into their next purchase, but are there tradeoffs to consider?

We break down the typical fees charged for 1031 exchanges and explain the less-obvious hidden fees (like wire or rush fees) that can crop up