Summary. A like-kind exchange is a deadline exercise with one absolute prerequisite: the qualified intermediary must be engaged and the assignment in place before the relinquished property closes, because once the taxpayer has the right to receive the proceeds no subsequent structure can fix it. This checklist runs the transaction chronologically from listing through the tax return, calls out the two statutory deadlines that cannot be extended, and flags the traps that end otherwise sound exchanges.

What this checklist is for. Executing a § 1031 exchange. For the analysis behind each step, see Structuring a 1031 Like-Kind Exchange.

Phase 1 — Before listing the relinquished property

  • Confirm the property was held for productive use in a trade or business or for investment, and is not held primarily for sale.
  • Confirm it is real property. Since 2018, personal property does not qualify.
  • Confirm the taxpayer of record, and that the same taxpayer will acquire the replacement — subject to the disregarded entity rule for single-member LLCs and grantor trusts.
  • If the property is held in a partnership and the partners disagree, evaluate a drop and swap or a § 761(a) election early, with tax counsel, and not on the eve of closing.
  • Model the transaction: expected price, debt payoff, adjusted basis, realized gain, depreciation recapture, and the replacement value and debt required for full deferral.
  • Select and vet a qualified intermediary: segregated qualified escrow or trust accounts, a fidelity bond, errors and omissions coverage, dual disbursement authorization, financial strength, and state registration or bonding where required.
  • Confirm the QI is not a disqualified person — not the taxpayer's agent, and not anyone who has been the taxpayer's employee, attorney, accountant, investment banker, or real estate agent within the preceding two years. Your own lawyer or CPA cannot serve.
  • Add a cooperation clause to the listing agreement and the purchase and sale agreement, permitting assignment to a QI at no cost or liability to the buyer.
  • Begin identifying candidate replacement properties now.

Phase 2 — Before the relinquished closing

  • Execute the exchange agreement with the QI.
  • Assign the purchase and sale contract to the QI.
  • Deliver written notice of the assignment to the buyer, and obtain a written acknowledgment.
  • Confirm the settlement statement directs the net proceeds to the QI, not to the seller.
  • Confirm no funds are released to the taxpayer for any purpose, including a credit for prorated rents, a security deposit transfer, or the payoff of an unrelated loan — each of which is boot.
  • Confirm the exchange agreement expressly limits the taxpayer's right to receive, pledge, borrow, or otherwise obtain the benefits of the funds.
  • For a nonresident seller, file the state's withholding exemption certificate before closing.
  • Confirm any transfer tax exemption is claimed with the required documentation.

Phase 3 — Days 1 through 45: identification

  • Day 0 is the date the relinquished property transfers. Calendar day 45 and day 180 immediately.
  • Deliver a written identification, signed by the taxpayer, to the QI or to another non-disqualified party involved in the exchange, before the end of the 45th day.
  • Describe each property unambiguously — legal description, street address, or a distinguishable name. For property to be constructed, describe the land and the improvements as specifically as practicable.
  • Satisfy one of the identification rules:
    • Three-property rule — up to three properties of any value; or
    • 200% rule — any number whose aggregate fair market value does not exceed 200% of the relinquished property's value; or
    • 95% rule — any number, provided at least 95% of the identified value is actually acquired.
  • Identify three properties, in order of preference, even if the first is under contract. Deals fail, and a taxpayer with one identified property that falls out on day 60 has a fully taxable sale.
  • Specify percentage interests where less than the whole will be acquired.
  • Revoke in writing before day 45 if the identification changes; after day 45 it is fixed.
  • Retain proof of delivery and a signed, dated copy.

Phase 4 — Days 46 through 180: acquisition

  • Confirm the 180-day deadline is the earlier of 180 days from the transfer or the due date of the return, including extensions, for the year of the transfer.
  • Extend the return where the relinquished property closed late in the year, or the period is cut short. This single step saves a meaningful number of exchanges every year.
  • Assign the replacement purchase contract to the QI and notify the seller in writing.
  • Confirm full deferral requirements: reinvest all net proceeds, and acquire property of equal or greater value, replacing any debt relieved with new debt or with additional cash.
  • Remember that cash boot cannot be offset by taking on more debt, though mortgage boot can be offset by contributing cash.
  • Confirm no non-exchange expenses are paid from exchange funds.
  • Close by the deadline. No extension is available except IRS disaster relief.
  • Confirm the deed runs to the correct taxpayer.

Phase 5 — Reverse and improvement exchanges

  • If the replacement must close first, structure a reverse exchange under Revenue Procedure 2000-37.
  • Execute a qualified exchange accommodation agreement in writing within five business days of the transfer to the exchange accommodation titleholder.
  • Identify the relinquished property within 45 days of the parking.
  • Transfer the parked property out within 180 days of the parking.
  • Talk to the lender before engaging the EAT. Many lenders will not lend to an accommodation entity, and the structure must be arranged around the lender's requirements.
  • Consider parking the relinquished property instead where the replacement financing will not accommodate an EAT.
  • For an improvement exchange, confirm the improvements can be completed within the 180 days — they count only if actually completed — and describe them specifically in the identification.

Phase 6 — Related parties

  • Determine whether either counterparty is a related person under IRC § 1031(f), referencing §§ 267(b) and 707(b).
  • Understand the two-year rule: if either party disposes of the property within two years, nonrecognition is retroactively disallowed.
  • Avoid buying replacement property from a related party. This is the structure the anti-abuse provision targets, and it is high-risk. If unavoidable, the related party should itself complete an exchange.
  • File Form 8824 identifying the related party, and continue filing it for the following two years.

Phase 7 — Reporting and afterward

  • File Form 8824 with the return for the year of the relinquished transfer, reporting dates, values, and any boot.
  • Compute the basis in the replacement property: relinquished basis, plus gain recognized and additional cash invested, less boot received.
  • Determine the depreciation treatment — carryover basis continuing on the remaining recovery period, plus excess basis as newly placed in service — or elect otherwise.
  • File any state clawback report, such as California's Form 3840, and continue filing annually for as long as the deferred gain remains. Failure permits the state to assess the deferred gain.
  • Retain the exchange agreement, identification with proof of delivery, both settlement statements, and the QI's accounting permanently. The replacement property's basis depends on them, and a sale twenty years later will require them.

Common mistakes

  1. Closing the sale before engaging a QI. Fatal and not fixable.
  2. Using your own attorney or CPA as QI — a disqualified person.
  3. Missing the 45-day identification, or identifying ambiguously.
  4. A December sale with no return extension, cutting 180 days to the April due date.
  5. Identifying only one property, which then falls out of contract.
  6. Debt relief not replaced, producing tax in an otherwise successful exchange.
  7. Non-exchange expenses paid from exchange funds.
  8. Buying replacement property from a related party.
  9. A drop and swap executed days before closing, with no documented investment intent.
  10. Failing to file the state clawback report year after year.
  11. A construction timeline that cannot finish within 180 days.
  12. The wrong taxpayer on one side of the transaction.

Primary authority

  • IRC § 1031, including (a)(3) (deadlines) and (f) (related parties); Treas. Reg. § 1.1031(k)-1-1) (deferred exchanges and the safe harbors); Revenue Procedure 2000-37 (reverse exchanges); Revenue Procedure 2008-16 (vacation homes); Revenue Procedure 2002-22 (tenancy in common); Revenue Ruling 2004-86 (Delaware statutory trusts).
  • Related provisions: IRC § 121; § 453; § 721; § 1014.

Related

This checklist is educational and not legal or tax advice. The § 1031 deadlines are statutory and cannot be extended except by IRS disaster relief, and state conformity and clawback rules vary. Consult qualified tax counsel and a qualified intermediary before the relinquished property closes.