Tax Deferral, Not Tax Escape
Deferred taxes include capital gains tax and depreciation recapture, so the full equity from the sale stays available to reinvest in the replacement property instead of going to the IRS at closing.
Seller & Investor Resources
1031 Exchange — Deferring Capital Gains on Investment Property
A 1031 exchange lets an investment-property owner sell one property and buy another while deferring the capital gains tax — but only if strict IRS deadlines and rules are followed. Here's how the process works and how our closing team keeps both legs of your exchange on track.
What is a 1031 exchange?
The Exchange in Four Facts
A 1031 exchange gets its name from Section 1031 of the Internal Revenue Code. It allows an investor to sell real property held for investment or productive use in a business and reinvest the proceeds into another like-kind property without immediately paying capital gains tax on the sale. The gain isn't erased — it carries over into the new property, and the tax is deferred until that property is ultimately sold outside of an exchange.
Like-Kind, Loosely Defined
"Like-kind" is broader than it sounds for real estate: an office building can be exchanged for apartments, raw land for a rental, a Michigan duplex for commercial property in another state. Nearly all U.S. real property held for investment qualifies.
Investment Property Only
Only real property held for investment or use in a trade or business qualifies. Your primary residence and a flip you never rented don't qualify — vacation homes face additional use tests.
Sell, Then Reinvest
An exchange isn't a swap: you can sell first and buy later, or buy first and sell later. Because the money can never touch your hands in between, a Qualified Intermediary — an independent facilitator — must hold the funds between the two closings.
What you have to do
The 1031 Process, Step by Step
The exchange itself is governed by IRS deadlines that start the day your relinquished property closes. Here is the sequence an investor follows:
Engage a Qualified Intermediary First
Before closing
Before the relinquished property closes, the investor signs an exchange agreement with a Qualified Intermediary (QI), who is named as the seller in the sale and holds the net proceeds after closing.
The QI must be in place before closing day — if the sale funds to you personally, the exchange can't be started retroactively.
Note: Choose the QI early, not at the closing table.
Close the Sale
Day 0
The investor closes the sale of the relinquished property. The net proceeds go to the QI, not to the seller — this is the step that makes the exchange work.
Day one of the IRS clock starts at this closing.
Note: The clock starts at this closing.
Identify Replacements in 45 Days
Days 1–45
Within 45 days of the sale, the investor must identify replacement property in writing to the QI — by address or legal description, using the three-property rule, the 200% rule, or the 95% exception.
The identification deadline is fixed: the property you close later must be on that written list.
Note: 45 calendar days, weekends included.
Close the Replacement in 180 Days
Days 1–180
The investor must close on the replacement property (or properties) within 180 days of the relinquished sale — or by the due date of their tax return, whichever comes first.
The QI uses the held funds to purchase the replacement property for the investor, completing the exchange. If value or debt isn't fully replaced, the shortfall — called "boot" — is taxable.
Note: 180 days — or tax-filing day, whichever is sooner.
Report It on Your Return
After closing
The investor reports the exchange on their tax return (Form 8824) for the year the relinquished property sold, carrying the deferred gain and the depreciation basis into the new property.
Note: Form 8824 goes with your annual return.
Why it matters: miss either deadline and the exchange fails — the gain becomes taxable in the year of the sale, even if you complete a purchase later. The deadlines are statutory and are almost never extended.
How we help
How the Title Company Helps
The Qualified Intermediary runs the exchange itself — but a 1031 is still two real estate closings, and that's our side of the table. Here's how our closing team supports your exchange:
QI Coordination
We coordinate with your Qualified Intermediary from the moment you submit the order, preparing the settlement documents so the sale proceeds route to the exchange — never directly to you. Proceeds that touch the seller's hands can disqualify the exchange.
Exchange-Ready Documents
We prepare assignment and settlement language consistent with your exchange agreement, so the closing paperwork names the intermediary and the exchange correctly on both legs of the transaction.
Deadline Awareness
Exchanges live and die on deadlines. We track your closing date against the 45-day identification and 180-day completion windows and flag schedule risks early, so a closing delay doesn't cost you the tax deferral.
Wire Protection
Exchange funds move by wire, which makes 1031 closings a target for wire fraud. We use CertifID identity verification and confirmed wire instructions on every closing — and we'll never email you changed wiring details.
Planning a 1031 Exchange in Michigan?
Timing drives an exchange, so bring us in early. Tell your Qualified Intermediary you're closing with Select Title and we'll coordinate both legs of the exchange — the relinquished sale and the replacement purchase — so your deadlines are never in question.
General Information — Not Tax or Legal Advice
This page provides general information about 1031 exchanges and is not tax or legal advice. Eligibility, deadlines, partial exchanges, and depreciation rules depend on the specifics of each transaction and each taxpayer's situation. Always engage a Qualified Intermediary and consult a tax professional or attorney before starting an exchange. Our role at closing is to administer the settlement side of the transaction in coordination with your QI — we do not select properties, hold exchange funds, or advise on tax strategy.