1031 Exchange Strategy Planner

Tax Deferral Estimate: $400,000 gain × combined federal/state rate ~33% = ~$132,000 deferred. That $132K stays invested and compounds in your replacement asset. Key Deadlines: Day 0 = closing on relinquished property. Day 45 = must identify replacement property in writing to QI. Day 180 = must close on replacement. These deadlines are absolute — no extensions. Recommended Structure: Standard forward exchange (reverse not needed since you're selling first). Use 3-property rule: identify up to 3 replacement properties regardless of value. Boot Risk: If replacement property is $1.3M and you receive $50K cash back at closing, that $50K is 'boot' and is immediately taxable. Solution: ensure replacement value equals or exceeds $580,000 net proceeds. Exchange vs. Sell: Exchange — $132K stays invested, compounds at 7%/yr = $185K additional wealth in 5 years. Sell and pay — immediate $132K tax bill, reduced buying power.