Types of 1031 exchange rules



The following methods can be used, whether you are exchanging from one property to another, or are working with multiple assets.

Delayed Exchange

The delayed exchange is the most common method in use. Through the delayed exchange, you sell your property, find a like-kind replacement property within 45 days (“identification period”), then close on the replacement property within 180 days (“exchange period”).

Simultaneous Exchange

The simultaneous exchange is a direct property swap, allowing you to exchange your asset’s deeds and additional documents with another party, through ownership transfer.  

Improvement Exchange

Let’s say the following happens. You’ve identified the ideal asset for an exchange, but it doesn’t meet the “equal or greater value” mandated by the Internal Revenue Service (IRS) 1031 exchange rules.
In this situation, an improvement exchange – also known as a “construction” or “build-to-suit” exchange – allows you to enhance that replacement asset’s value, through the use of the exchange equity.

Reverse Exchange

Enter the reverse exchange, which lets you purchase that replacement property, before the property you’re selling closes.
Though the reverse exchange can be ideal in a hot market with scarce inventory, it can be difficult to carry out, without assistance from a Qualified Intermediary (QI)or other professional.

Personal Property Exchange

Finally, real property is not the only asset that can be exchanged. Personal property can also fall under the IRC 1031 code, as long as you exchange into a like-kind replacement property.


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