The Direct Answer
Speak with your CPA, qualified intermediary, and attorney before transferring the property or receiving proceeds. Establish whether the transaction qualifies, how the exchange must be structured, and which deadlines apply. Then underwrite replacement property on its own merits.
Ask whether the actual transaction qualifies
The IRS describes Section 1031 as applying to qualifying exchanges of real property held for business or investment. Property held primarily for sale does not qualify. Like-kind treatment is not simply permission to sell any asset and buy real estate with the proceeds. See source 1.
Give the CPA the actual ownership, use, holding history, depreciation records, debt, and proposed sale structure. Ask what additional information is needed before receiving a written recommendation. A business sale, an entity-interest sale, and a real-property exchange require their own analysis.
Understand deferral before comparing options
Ask the CPA to model the proposed sale with and without the contemplated exchange. Request an explanation of recognized gain, basis, transaction costs, debt relief, and any cash or non-like-kind property involved. The IRS says money or other property received can cause recognition of gain. See source 1.
Use your own records for the calculation. Do not estimate a tax benefit from the sale price alone, and do not describe deferral as permanent elimination of the tax. Decide how much uncertainty remains before choosing a transaction structure.
Put the exchange team in place before closing
Have counsel and the qualified intermediary explain the documentation, assignment, handling of proceeds, and restrictions on access to funds. Ask the CPA to confirm that the contemplated structure fits the ownership and tax facts.
IRS Publication 544 addresses safe harbors concerning actual or constructive receipt, including qualified-intermediary arrangements. Ask the exchange team to apply the requirements before the sale closes. Do not assume that a later transfer of money will repair an earlier receipt problem. See source 2.
Write the deadlines on one calendar
| Requirement | IRS framework for a deferred exchange |
|---|---|
| Identification | Replacement property must be identified within 45 days after transfer of the relinquished property. |
| Receipt | Replacement property must be received by the earlier of 180 days after transfer or the applicable return due date, including extensions. |
| Documentation | Identification must satisfy the written-description and delivery requirements. |
These periods run together. The identification period does not precede a separate new 180-day period. Have the CPA and intermediary confirm your actual dates, filing-extension implications, and any applicable relief rather than calculating from memory. See source 2.
Prepare replacement criteria before the sale
Write down the property type, location, size, capital commitment, financing requirement, and management capacity you will accept. Include unacceptable physical, tenant, use, or maturity risks. Give the search team those criteria early.
Ask what happens if no suitable property is available. A deadline can create pressure to accept something outside the original requirement. Resolve your fallback with the CPA before relying on an exchange as the only possible outcome. The tax objective does not answer whether a replacement is a sound acquisition.
Keep due diligence intact
- Verify leases, collections, operating costs and tenant obligations.
- Obtain the physical and environmental review appropriate to the asset.
- Confirm use, access, title and site conditions.
- Establish financing conditions and the closing schedule.
- Budget improvements, transaction costs and reserves.
- Review contractual rights and notice deadlines with counsel.
Make the acquisition schedule fit the actual exchange calendar. If essential work cannot be completed within the available time, discuss that conflict explicitly. Identification is not a substitute for verified property information.
Ask about the ownership and cash structure
Give counsel and your CPA the names and entity documents for both sides of the transaction. Ask whether the proposed ownership, debt, co-ownership, or distribution arrangement creates issues. Do not assume that an entity change or adding a partner is administratively neutral.
Ask how much cash must remain committed to the exchange and what funds you will need outside it for costs or reserves. These are transaction-specific calculations. Keep them separate from a broker’s property-price comparison.
Your pre-sale meeting agenda
- Confirm property and transaction eligibility.
- Model the taxable-sale alternative using actual basis records.
- Establish the exchange structure and proceeds controls.
- Confirm identification and receipt dates in writing.
- Agree on replacement criteria and financing capacity.
- Set a fallback if suitable replacement property is unavailable.
- Assign document, notice and closing responsibilities.
The broker can help identify and evaluate property. The CPA, intermediary, and attorney must address the tax and legal structure. Keep both tracks coordinated from the start.
Sources & scope
1. IRS: like-kind exchanges of real estate2. IRS Publication 544: deferred exchangesSource review: October 2, 2026. Recheck rules, documents, and project statuses before relying on them in a transaction. Checklists and decision questions are editorial guidance; numerical examples are labeled hypothetical.
Educational planning questions, not individualized tax or legal advice. Have your CPA, qualified intermediary, and attorney determine the applicable requirements.