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What is a 1031 Exchange?

Download the 6 Page Thought Leadership on Understanding 1031 Exchanges and Delaware Statutory Trusts

Section 1031 became part of the IRS tax code in 1921. It allows a taxpayer selling an appreciated investment property to purchase another of equal or greater value without incurring an immediate capital gains tax consequence. The replacement property must also have equal or greater debt, and all proceeds from the sale must be invested in the replacement property to make the transaction tax deferred.

In 1995, the IRS rules included a provision that allows for the purchase/exchange into a partial interest of the professionally managed real estate, which today is usually accomplished through a Delaware Statutory Trust (DST).

Investors may use exchanges under IRS Code Section 1031 to defer capital gains on the sale of appreciated investment properties.

1031 Exchange Timeline that you must adhere to:

An illustration of 1031 Exchange Timeline
  • Sale: Owner arranges for the sale of their appreciated property.

  • At closing: Sale proceeds are deposited with a Qualified Intermediary (QI) or escrow agent.

  • 45 days: Within 45 days, the seller must identify a potential replacement property.

  • Sold 180 days: Within 180 days, the seller must close on the replacement property purchase.

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Keystone National Properties (KNPRE) is a real estate and private equity firm whose team is passionate about delivering value, the strategic growth of the firm, and positively impacting the world. KNPRE’s founding philosophy is “Doing well by doing good.”

This material does not constitute, or form part of a solicitation in any state or other jurisdiction or offer to purchase or issue any interest in an investment vehicle or any security or investment product. Any such offer or solicitation will only be made pursuant to the respective investment vehicle’s offering documents and relevant subscription documents, which will be furnished to qualified investors on a confidential basis at their request. The information contained herein has been prepared by Keystone 1031 and is current as of the date hereof.



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