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:

1. Sale of Relinquished Property: You sell your Oregon rental property for $500,000. Instead of receiving the proceeds directly, you engage Deferred.com to act as your qualified intermediary. We hold the funds from the sale to ensure you do not have constructive receipt of the money, which is crucial for maintaining the tax‐deferred status of the exchange.
2. Identification Period: Within 45 days of selling your Oregon property, you must identify potential replacement properties. You can identify up to three properties, regardless of their value, or more than three properties if their combined value does not exceed 200% of the relinquished property’s value.
3. Purchase of Replacement Property: You decide to purchase a commercial property in Arizona for $500,000. Deferred.com uses the funds from the sale of your Oregon property to acquire the Arizona property on your behalf. This must be completed within 180 days of the sale of the relinquished property.
4. Completion of Exchange: Once the Arizona property is acquired, the exchange is complete. You have successfully deferred capital gains taxes on the sale of your Oregon property by reinvesting in a like‐kind property in Arizona.

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.