Illustrative examples of various 1031 exchange structures and strategies.
Setup: Hypothetical investor transfers qualifying investment property on June 1. The normal calendar-day identification date is July 16 and day-180 date is November 28. The federal return due date, including extensions, and any eligible IRS relief must also be checked. Proceeds, debt, basis, and costs are separate inputs.
Outcome: No tax outcome can be determined from purchase price alone. Review realized gain, qualifying reinvestment, net debt relief, boot, and any mixed-asset recapture with a tax advisor.
Setup: Investor finds ideal replacement property but doesn't have liquidity yet. Uses an Exchange Accommodation Titleholder (EAT) to purchase the replacement property first.
Structure: EAT holds title and leases to investor. Investor sells relinquished property within 180 days. EAT transfers title to investor at closing.
Setup: Three partners in a partnership want different outcomes. Partnership distributes TIC interests proportionally. Withdrawing partner cashes out. Remaining partners individually exchange their TIC interests.
Result: Not a guaranteed non-taxable result. Partnership distribution rules, liabilities, investment intent, timing, and step-transaction risks need professional analysis before a drop-and-swap.
Setup: Investor owns $3M rental property but is retiring. Exchanges proceeds into three DST beneficial interests.
Outcome: A qualifying DST arrangement may offer passive ownership, but distributions and returns are not guaranteed. Eligibility, liquidity, sponsor risk, fees, and offering restrictions must be reviewed.
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