Exchanging Thoughts

How a 1031 Exchange Helped a Shore Property Owner Preserve Nearly $1.5 Million in Taxes

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Thu, 28 May 2026 16:54:17 GMT

Why More Shore Property Owners Are Exploring 1031 Exchanges

For many long-time property owners in coastal resort communities, appreciation has created extraordinary wealth over the last decade. Properties purchased years ago for under $1 million are now selling for several million dollars in highly desirable coastal communities.

Along the South Jersey coast, affectionately known simply as “the Shore,” demand for second homes and investment properties has remained exceptionally strong. Communities like Avalon, Stone Harbor, Ocean City, Sea Isle City, Long Beach Island, and surrounding coastal markets continue to attract investors, vacation homeowners, and high-net-worth buyers seeking both lifestyle and long-term appreciation opportunities.

As 1031 CORP. continues expanding its presence in one of the country’s hottest second-home real estate markets, our newest branch serving the South Jersey Shoreline is helping more investors navigate the unique opportunities and challenges associated with highly appreciated coastal investment properties.

While appreciation has created significant wealth for many owners, it has also created a major challenge when it’s time to sell.

Federal capital gains taxes, state income taxes, depreciation recapture, and the Net Investment Income Tax can significantly reduce the proceeds available for reinvestment.

Fortunately, a properly structured 1031 exchange may provide an opportunity to defer those taxes and preserve more equity for future investments.

One recent scenario involving a South Jersey Shore property owner demonstrates just how powerful that strategy can be.

The Scenario: A Highly Appreciated Avalon Rental Property

A married couple had owned a rental property in Avalon, New Jersey for approximately ten years. Over that time, the property experienced substantial appreciation as demand for Shore properties continued to increase.

This recent case study represents a fairly typical exchange scenario we are seeing throughout today’s Shore market, where long-term owners of highly appreciated vacation area rental properties are looking to reposition assets without losing significant equity to taxes.

Property Details

Original purchase price: approximately $800,000
Capital improvements: none
Depreciation taken: approximately $180,000
Current market value: approximately $5 million
Debt: none
Property use: always held as a rental investment property

Like many Shore investors, the couple loved the market and wanted to continue investing near the coast. Their goal was to acquire a larger property closer to the water that could generate higher rental income and long-term appreciation potential.

But there was one major obstacle. Selling the property outright would likely trigger a massive tax bill.

The Hidden Tax Impact of Selling Investment Property

Many investors focus primarily on the sale price of their property. However, the tax consequences of selling highly appreciated real estate can come as a surprise. In this case, the estimated taxable gain was approximately $4.2 million.

That created potential exposure to:

15 – 20% Federal capital gains taxes
Up to 10.75% New Jersey state income taxes
3.8% Net Investment Income Tax (NIIT)
25% Depreciation recapture taxes

Estimated tax exposure included:

Approximately $840,000 in federal capital gains taxes
Approximately $451,500 in New Jersey state income taxes
Approximately $159,600 in Net Investment Income Tax
Approximately $45,000 in depreciation recapture taxes

Total Estimated Tax Liability: Approximately $1.5 million

Without planning, the couple would have reduced their reinvestment capital from $5 million to approximately $3.5 million after taxes. That reduction in available equity would significantly limit their future investment opportunities.

The 1031 Exchange Strategy

Instead of selling outright and paying taxes immediately, the couple chose to complete a properly structured 1031 exchange.

Section 1031 of the Internal Revenue Code allows investors to defer recognition of capital gains taxes when exchanging investment or business-use real estate for qualifying replacement property. By utilizing a 1031 exchange, the couple preserved the full $5 million of equity for reinvestment. This dramatically increased their purchasing power.

The Power of Leverage

One of the most overlooked advantages of a 1031 exchange is how tax deferral impacts leverage and acquisition potential. Assuming conventional financing with approximately 30% down:

Without a 1031 exchange, purchasing power was approximately $10.8 million
With a 1031 exchange, purchasing power increased to approximately $15.5 million

The Difference: Approximately $4.7 million in additional buying power

That additional acquisition power opened the door to significantly larger and more desirable investment opportunities closer to the ocean or bay.

Why This Matters for Shore Property Owners

Many Shore property owners purchased properties years before today’s dramatic appreciation occurred in coastal markets. As values continue to rise, tax exposure rises alongside them.

For investors considering selling highly appreciated Shore rentals, a properly planned 1031 exchange may create opportunities to:

Preserve more investment capital
Upgrade into larger or more desirable properties
Improve rental cash flow
Relocate closer to premium waterfront property
Diversify real estate holdings
Continue building long-term wealth using pre-tax dollars

For many investors, preserving equity rather than immediately paying taxes can substantially impact long-term portfolio growth.

Additional Benefits Beyond Tax Deferral

In this scenario, the benefits extended beyond preserving their equity. Because the deferred gain was not immediately recognized as taxable income, the couple potentially avoided having all their annual income taxed at the highest marginal rates during the year of sale.

The exchange also created opportunities for:

Additional depreciation deductions
Greater long-term appreciation potential
Stronger rental income from upgraded assets
More strategic estate planning opportunities

Planning Is Critical

A successful 1031 exchange requires advance planning and coordination. Important deadlines, identification rules, and documentation requirements apply to every exchange transaction. Investors should begin discussions with their advisors before listing a property for sale whenever possible.

Early planning often creates substantially more flexibility and better outcomes.

Final Thoughts

This Avalon case study demonstrates how a 1031 exchange can become much more than a tax strategy.

For many investors, it becomes:

a wealth preservation strategy,
a portfolio growth strategy,
and a long-term investment planning tool.

As Shore property values continue to rise, more investors are exploring how strategic tax deferral may help them preserve equity and unlock larger future opportunities.

With the expansion of 1031 CORP.’s newest branch serving the South Jersey Shore, our team is uniquely positioned to help investors navigate the increasingly sophisticated opportunities emerging throughout one of the nation’s most active second-home and vacation rental markets.

If you own highly appreciated investment property, now may be the ideal time to evaluate your options.

Ready to Explore Your Options?

Contact 1031 CORP. today for a complimentary consultation.

1031 CORP. Renews Idaho QI License—Continuing to Exceed Escrow Law Requirements in 2026

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Tue, 19 May 2026 14:29:31 GMT

In today’s real estate market, the safety of exchange proceeds is critical—especially when it comes to 1031 tax-deferred exchanges. Idaho is one of the few states to enact legislation specifically regulating Qualified Intermediaries (QIs), offering additional security for taxpayers. At 1031 CORP., we’re proud to announce that we have successfully renewed our Idaho QI license, reinforcing our long-standing commitment to exceeding regulatory requirements and protecting our clients at the highest level.

Overview of Idaho’s Escrow Law for Qualified Intermediaries

Passed in 2010, Idaho Code Section 30-20-301 set the standard for how QIs must operate when facilitating 1031 exchanges within the state. The law was created in response to cases of QI fraud and insolvency, which left some taxpayers unable to recover their funds.

Idaho’s QI law requires:

Fiduciary Duty: QIs must act in the best interest of the taxpayer, with full transparency and accountability.
Segregated Accounts: Exchange funds must be held in qualified escrow or trust accounts, not commingled with operating funds.
Financial Safeguards:
- A minimum $1 million fidelity bond
- At least $250,000 in errors and omissions (E&O) insurance)
State Registration: QIs must register with the Idaho Secretary of State and provide details on their officers and financial protections.
Annual Reporting and Compliance: Licensed QIs are subject to annual filings to maintain good standing.

These requirements make Idaho one of the most protective states for taxpayers engaging in 1031 exchanges.

Benefits of Using an Idaho-Licensed QI

Selecting a QI that meets Idaho’s requirements provides meaningful benefits to taxpayers:

Protection of Exchange Proceeds: Segregated, secured accounts reduce the risk of misappropriation or financial loss.
Fraud Prevention: Bonding and insurance coverage create a critical safety net in the event of theft, error, or negligence.
Increased Transparency and Trust: State oversight ensures QIs are acting in the best interests of their clients.
Enhanced Due Diligence: Choosing a QI with Idaho licensing shows a commitment to high standards and operational integrity.

1031 CORP. – Exceeding Idaho’s Standards from the Start

While we are proud to be an Idaho-licensed Qualified Intermediary, 1031 CORP. has always gone well beyond what Idaho law requires. Renewing our license is not just a regulatory milestone—it’s a reaffirmation of our unwavering commitment to client protection and industry leadership.

Here’s how we go above and beyond:

Multi-Million Dollar Fidelity Bond: Far surpassing the $1 million minimum, this bond protects clients from employee dishonesty and criminal acts.
Extensive Professional Liability (E&O) Insurance: Our professional liability coverage is well above the state-required $250,000, providing robust protection in the event of an error or omission.
Use of Qualified Escrow Accounts: We ensure all exchange funds are placed in separate, secure accounts with limited access, further safeguarding your investment.
Voluntary Best Practices: Our internal controls, compliance reviews, and continuous training programs reflect our dedication to integrity, transparency, and excellence.

At 1031 CORP., our clients aren’t just protected—they are prioritized. We’ve built our reputation on doing the right thing, even when no one’s looking. Exceeding compliance isn’t just a goal—it’s our culture.

Final Thoughts

Idaho’s QI escrow law provides important protections for taxpayers—protections we believe should be the standard nationwide. 1031 CORP. has once again renewed its license with pride, continuing to demonstrate industry-leading practices that give our clients confidence and peace of mind.

Planning a 1031 exchange? Choose a QI that’s not just licensed—but trusted. Contact 1031 CORP. to learn how our commitment to security and stewardship sets us apart.

Who Really “Does 1031 Exchanges?” Understanding the Critical Role of the Qualified Intermediary

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Tue, 19 May 2026 13:00:03 GMT

If you spend time in commercial real estate, investment property, or the passive real estate investment space, you’ve probably heard many professionals say: “We do 1031 exchanges.”

Real estate brokers
Delaware Statutory Trust (DST) sponsors and brokers
Syndicated TIC sponsors
Investment advisors
Closing agents
Even some marketing companies (by implication)

The result is predictable: investors often walk away unclear about who is actually responsible for facilitating a 1031 exchange and what role each professional plays.

At 1031 CORP., an independent Qualified Intermediary (QI), we regularly hear investors say:

“I want to 1031 into a REIT.”
“Tell me about a DST 1031.”
“I am considering a 1031, DST, or 721.”
“I don’t want to be a landlord anymore. What are my options so that I can still defer taxes?”

This confusion has grown as more companies weave “1031 exchange” into their branding without clearly explaining what they do—and what they don’t do—in the transaction.

Key takeaway: A 1031 exchange is a tax-deferral strategy governed by IRC Section 1031 and must be facilitated by an independent and objective Qualified Intermediary (QI), regardless of the replacement property you choose, including a DST.

There Is Only One Set of 1031 Exchange Rules

Section 1031 of the Internal Revenue Code does not create separate categories of exchanges. There aren’t different rulebooks for:

DST exchanges
Commercial exchanges
Residential rental exchanges
Large exchanges
Small exchanges
Single-property exchanges
Multi-state exchanges

The same 1031 timelines and requirements apply no matter:

The size of the transaction
The type of relinquished property
The replacement property selected
The exchanger’s investment strategy

So Who Actually “Does the 1031 Exchange?”

In a delayed exchange, the QI is the party that facilitates the exchange under the Treasury Regulations. Practically speaking, the QI is the independent third party responsible for:

Guiding the exchanger through the exchange process
Providing necessary exchange documents
Coordinating the exchange structure
Holding exchange proceeds
Receiving assignment of sales contracts
Tracking critical deadlines
Managing identification requirements
Helping ensure the exchanger does not receive actual or constructive receipt of funds

Without a properly structured exchange facilitated by an independent QI, most delayed exchanges—where the client sells first and buys second—will not qualify for tax deferral under Section 1031.

Every Professional Has an Important—But Different—Role

A successful 1031 exchange usually involves a team. Each professional is important, but each has a distinct job, and only the QI facilitates the exchange.

The CPA or Tax Advisor

The exchanger’s CPA or tax advisor evaluates:

Tax consequences
Depreciation recapture
Basis calculations
Partnership considerations
Estate planning issues
Whether a 1031 exchange makes financial sense

The QI does not provide tax advice, and the exchanger’s tax advisor cannot serve as the QI.

The Attorney

The exchanger’s attorney may assist with:

Legal structuring
Entity formation
Contract review
Asset protection
Estate planning
Complex ownership matters

The QI does not provide legal advice, and the exchanger’s legal advisor cannot facilitate a 1031 exchange.

The Real Estate Broker

The commercial broker or residential real estate agent helps:

Sell relinquished property
Locate replacement property
Negotiate transactions
Identify investment opportunities

The exchanger’s real estate broker or agent cannot serve as the QI.

The DST Sponsor or DST Broker

DST professionals help investors evaluate DST offerings as potential replacement property.

Remember, the DST is the replacement property. A DST sponsor or broker is not a QI and cannot facilitate the exchange. A DST is simply one form of replacement property that may qualify under Section 1031. Choosing this passive investment doesn’t create a different type of exchange.

Why Marketplace Confusion Is Growing

Much of the confusion comes from marketing. Some advertise or emphasize “1031 exchanges” even though their primary business is actually:

Selling DST investments
Offering securities
Providing investment opportunities
Generating replacement property leads

This can make it hard for investors to tell:

Who is facilitating the exchange
Who is selling investments
Who is providing advice
Whether the company is acting as a QI

As a result, investors often believe:

The investment company itself is automatically handling the exchange process
They must buy a DST to complete a 1031 exchange
A DST exchange follows different rules

Those misunderstandings create avoidable risk.

Who Can Serve as a Qualified Intermediary?

This is one of the most misunderstood parts of the 1031 exchange landscape.

Many investors assume that QIs are heavily regulated or licensed. In reality, in most states the barriers to entry are surprisingly low.

In many states:

No special license is required
No minimum experience is required
No testing is required
No certification is required
No formal training is required
No insurance is required

That means almost anyone can technically open a company and market themselves as a 1031 exchange facilitator.

Who Cannot Serve as the Qualified Intermediary?

Treasury Regulations prohibit certain parties from serving as the exchanger’s QI. Generally, a “disqualified person” cannot act as the QI if they have served as the exchanger’s advisor or agent within the two-year period preceding the exchange:

Attorney
CPA or accountant
Investment banker or broker
Real estate agent or broker
Employee
Partner
Close relative

The purpose of this rule is to ensure the QI remains independent and objective.

Ownership Restrictions Also Matter

Independence issues don’t stop with direct involvement.

A disqualified person generally cannot own 10% or more of the Qualified Intermediary entity and still facilitate exchanges for that person’s clients.

For example:

A real estate broker referring clients generally cannot own 10% or more of the QI facilitating those exchanges
Similar concerns can apply to CPAs, attorneys, investment advisors, or other disqualified parties

The IRS intended the QI to function independently — not as an extension of the exchanger’s existing agent relationships.

Referral Fees Can Create Additional Concerns

Another topic worth understanding is referral fee arrangements between Qualified Intermediaries and disqualified parties. Many times over the years, 1031 CORP. has been asked if we pay referral fees.

Referral fees are not automatically prohibited, but certain compensation structures may raise questions about a QI’s independence.

For example:

What happens if a disqualified party receives too large a portion of the total income earned by the QI on a particular exchange?
Does that create an indirect economic interest?
Could the arrangement blur the line between an independent QI and the exchanger’s existing agent?

The Treasury Regulations do not specifically address every referral fee structure. However, if a compensation arrangement suggests the disqualified party has substantial participation in the economics of the exchange facilitation business, which could invite scrutiny regarding whether the QI is truly independent.

These arrangements raise important questions:

Is the exchanger aware of the compensation relationship?
Is the QI acting independently?
Does the arrangement create conflicts of interest?
Could the structure jeopardize the integrity of the exchange?

These are not issues exchangers should discover after an IRS audit.

Why Experience Matters When Choosing a Qualified Intermediary

Because barriers to entry are low, investors should carefully evaluate the experience and infrastructure of the QI facilitating their exchange.

A common but incomplete question is: “How long have you been in the 1031 industry?” It can be misleading because someone may have been adjacent to the industry for years without directly facilitating exchanges.

Someone may have years of experience:

Selling DST investments
Marketing exchanges
Working in escrow
Performing administrative support
Operating adjacent to the industry

This does not mean they have the substantial experience needed to facilitate exchanges as a QI. A far better question is: “How much experience do you have directly facilitating 1031 exchanges?”

Investors should also ask:

How many exchanges have you facilitated?
What types of exchanges do you regularly handle?
Have you handled reverse exchanges or improvement exchanges?
How are exchange funds safeguarded?
What cybersecurity protections are in place?
What internal controls exist?
Who prepares the exchange documents?
Does the QI outsource document management, or is it handled by an in-house exchange team?
What happens when problems arise during the transaction?

Not all QIs possess the same level of experience, infrastructure, or expertise.

The Best 1031 Exchanges Happen When Everyone Understands Their Role

The 1031 exchange industry functions best when:

CPAs provide tax guidance
Attorneys provide legal advice
Brokers locate investment opportunities
DST professionals explain DST offerings
Closing agents coordinate settlements
Qualified Intermediaries facilitate the exchange itself

Each professional serves an important purpose. But clarity matters. Investors deserve to understand:

Who is facilitating the exchange
Who is selling investments
Who is providing advice
Whether the structure complies with IRS requirements

At the end of the day, a 1031 exchange is too important and often involves too much money to risk confusion about roles, responsibilities, or independence requirements.

Choosing the right Qualified Intermediary is not simply an administrative decision. It is a risk management decision.

In the end, it is one of the most important decisions an exchanger can make.

AI vs. Experience: Why Navigating the "Gray" Matters in a 1031 Exchange

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Mon, 20 Apr 2026 18:06:04 GMT

At first glance, a 1031 exchange seems straightforward.

The rules are clearly defined:

Identify replacement property within 45 days
Complete the exchange within 180 days
Reinvest in like-kind property

On paper, Section 1031 appears black and white.

But in reality? 1031 exchanges are filled with gray areas. That’s where experience, strategy, and human judgment matter most.

As more technology enters the 1031 exchange space, many platforms are designed to operate within that same black-and-white framework. The 1031 exchange industry, like many others, is seeing an increase in AI-driven platforms and automated solutions.

AI can absolutely play a valuable role, especially when it comes to managing the clear, rules-based aspects of an exchange. It can:

Track key 1031 exchange timelines
Streamline documentation
Improve internal efficiency

But investors should understand an important distinction—AI can follow rules. It cannot interpret nuance. In a tax-deferred 1031 exchange, nuance is everything.

The 1031 exchange regulations provide structure. But real-world transactions involve:

Unique ownership structures
Evolving deal terms
Investor-specific goals

That’s where the gray begins.

The Gray Areas of a 1031 Exchange

Even well-structured exchanges encounter situations that require experience, not automation. Here are just a few examples:

Intent: Held for Investment

There is no bright-line test for what qualifies as “held for investment.
”Intent is determined by facts and circumstances, making this one of the most nuanced aspects of a 1031 exchange.

Entity and Ownership Structuring

From LLCs to partnerships, structuring matters.
Questions require insight that goes beyond standard 1031 exchange rules, such as:
- Who should take title to the replacement property?
- Can ownership change?
- How should entities be handled?

Complex Transactions that introduce additional complexity and more gray

Reverse exchanges
Improvement exchanges
Multi-asset Transactions

Why Experience and Access Still Matter

When something unexpected happens, and it often does, you don’t want to rely on a system. You want:

A professional who answers the phone
A team that responds to emails promptly
Experts available by text when timing is critical

Because in a 1031 exchange, timing is everything, and delays can create real risk.

1031 CORP.: Experience You Can Trust. Service You Can Reach.

Not all Qualified Intermediaries are built the same, and in a 1031 exchange, that difference matters. For more than 35 years, 1031 CORP. has focused exclusively on 1031 exchanges, delivering the kind of hands-on expertise and personal support that complex real estate transactions demand.

At a time when some providers are moving toward high-volume processing models, centralized or offshore production teams, or AI-driven workflows, we’ve stayed committed to a more effective approach—direct access to experienced professionals who are actively involved in every exchange.

Our clients and their advisors work with knowledgeable exchange specialists who:

Provide thoughtful structuring, even for the most complex transactions
Identify potential issues early and empower our clients and their advisors to make informed decisions
Remain accessible throughout the entire 1031 exchange process

We believe exchanges shouldn’t be treated like transactions on an assembly line. They require judgment. They require experience. And they require accountability.

At 1031 CORP., we embrace technology, including AI, where it improves efficiency and enhances the client experience. However, we believe experienced professionals are better suited to help clients navigate the gray areas of a 1031 exchange.

Security, Transparency, and Confidence

Equally important is trust and giving clients confidence at every stage of the exchange. That’s why we prioritize the security and transparency of client funds, offering:

Ability to view your exchange on the bank's website
Trusted banking relationships
A disciplined approach to safeguarding exchange proceeds

A Partner for Every Exchange - Simple or Complex

Whether supporting a straightforward like-kind exchange or a complex, high-dollar transaction, our focus remains the same:

Deliver a seamless experience
Protect the integrity of the exchange
Help clients achieve their investment objectives
Be a reliable partner from start to finish.

Final Thought: Experience Is Essential

The rules governing a 1031 exchange may be black and white but successfully navigating the transaction means understanding the gray.

AI can enhance the process, but it cannot replace experience, judgment, accessibility, and human insight. Because when the stakes are high, experience isn’t optional. It’s essential.

Have questions about 1031 exchanges or want to talk through a specific situation? Contact us at 1.800.828.1031 or request a complimentary consultation.

What Makes a 1031 Exchange Successful? Here's What the Research Shows.

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Thu, 19 Mar 2026 13:58:41 GMT

1031 CORP. recently conducted new research that uncovered key challenges to achieving the many benefits of 1031 exchanges. What we found is that, even if your strategy and motivation are solid, you might not always complete a successful exchange.

We set out to learn why.

We surveyed 407 participants, including CPAs, attorneys, accountants, residential and commercial real estate professionals, financial advisors, and title/escrow officers, along with real estate investors across all experience levels.

The good news: There are five core steps to bridge the gap between strategy and execution.

The research findings point to clear actions that will lead to greater success for real estate investors considering a tax-deferred 1031 exchange, also known as a like-kind exchange, and advisors making recommendations.

Five Core Steps for More Successful Exchanges

Based on our new research, 1031 CORP. identified five core steps that support better outcomes for investors and the professionals who advise them:

Start the conversation earlier.
- By introducing the 1031 exchange option during disposition planning, you can avoid a mad rush the week before closing.
Connect the exchange to what investors care about.
- Leading with property values, cash flow, and market conditions allows a 1031 exchange to support long-term goals.
Provide role-appropriate guidance.
- Remember that different advisors play different roles in the process. By using clear communication and defined handoffs, advisors can help exchanges stay on track and create a better experience.
Get ahead of replacement property anxiety.
- Begin the property search before the relinquished property is even listed.
Build trust through transparency.
- By keeping all parties informed and coordinated throughout the exchange, everyone feels more confident moving through the process.

The biggest hurdle: Getting to the first exchange

Once investors experience how a 1031 exchange can preserve and grow their equity over time, it tends to become a regular part of how they invest. 74% of investors who complete the first exchange go on to become repeat exchangers, most commonly completing three to five exchanges over time. And 95% report feeling confident in the rules and process after that first exchange.

The key is making sure they know the option is available and that they have the right support when they're ready to use it.

We learned that investors and professional advisors alike gather information from a variety of sources, including through referrals. However, we recommend securing professional guidance from someone who knows the industry and can bring clarity and direction to the overall strategy.

Following these five steps will be key to successful exchanges.

1. Start the conversation earlier.

Earlier planning leads to better outcomes.

Involving a Qualified Intermediary (QI) early on can give investors more time to evaluate their options and make the 45-Day Identification window and 180-Day Exchange period more manageable.

Investors who begin 1031 planning during the disposition process, rather than shortly before closing, have more time for a thorough replacement property search and significantly less timeline pressure once the exchange is underway. When they don’t, those same deadlines can narrow options quickly and put investors in a difficult position.

Notably, 97% of investors who have never completed an exchange say they would consider one if they had better information. Start the 1031 conversation before a property hits the market to make sure everyone understands their options before a sale is already in motion.

2. Connect the exchange to what investors care about.

Today’s market realities make the stakes feel higher.

83% of professionals surveyed say interest rates are affecting how their clients view investing right now.

Investors are asking whether this is the right time to make a move, whether they will find a suitable replacement property within the required timeline, and whether the numbers make sense in the current rate environment. These are fair questions and addressing them early in the process makes a real difference.

Education and experience can be a superpower. It’s important for investors to partner with advisors who bring both to the table.

3. Provide role-appropriate guidance.

Not all investors or advisors are starting from the same place.

Our research identified three investor profiles that tend to show up most often in 1031 exchange conversations. Each brings a different set of priorities and questions to the table:

The Active Repeater has completed multiple exchanges and understands how the process works. In today's market, their focus is on cash flow, finding strong replacement properties, and keeping the timeline manageable across what are often more complex transactions.
The Beginner is aware of 1031 exchanges but hasn't completed one yet or has done only one or two. The biggest barriers are uncertainty around finding a replacement property in time and not fully understanding the rules.
The Lifestyle Shifter is looking to simplify. They may want to step back from active property management, consolidate holdings, or plan for the long term through estate planning strategies. For this group, passive investment options like Delaware Statutory Trusts (DST), Triple Net Leases (NNN), and oil & gas royalties often come into the conversation.

Understanding which of these profiles is most applicable to your situation helps shape the right conversation from the start.

Different professional advisors see different pain points based upon their role in the transaction. A one-size-fits-all strategy does not work. While residential agents might find their clients are stressed about tax implications or finding a replacement property, commercial brokers’ clients are more concerned about depreciation recapture and capital gains, and title and escrow professionals are worried about documentation and assignment requirements.

Every professional—including the above, CPAs, accountants, attorneys, and financial professionals—is going to follow a slightly different playbook.

4. Get ahead of replacement property concerns.

Prospective 1031 exchangers face a dilemma: You can’t start looking for a replacement property until after you’ve listed, but the 45-day clock doesn’t start till you close. Or so they think.

Earlier planning can break the cycle. Begin the property search before the relinquished property is even listed and start putting together a replacement property list. Engaging a QI at this stage will help you understand your options, and if you find your perfect property first, consider a reverse exchange as a creative alternative solution.

5. Build trust through transparency.

Having the right QI partner is essential because they can help reduce risk and enable earlier, confident conversations. Rely on the QI to follow the rules and coordinate exchange documentation and timelines. They are the hub that connects all relevant parties in the transaction.

By keeping everyone informed and coordinated throughout the exchange, each will feel more confident throughout the process.

What Comes Next?

The compounding effect of 1031 exchanges is one of the most powerful tools available to real estate investors. With the right resources and partners, more investors can take full advantage of it.

Have questions about 1031 exchanges or want to talk through a specific situation? Contact us at 1.800.828.1031 or request a complimentary consultation.

Housing Affordability in 2026: Reform the Primary Residence Exclusion to Unlock Inventory

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Tue, 10 Mar 2026 14:26:33 GMT

Housing affordability continues to be a dominant issue in 2026. Recent national headlines highlighted that President Donald Trump called for a ban on large institutional investors from purchasing single-family homes, framing it to make homeownership more accessible for Americans.

But while such proposals generate significant public attention, banning institutional buyers alone won’t fix the housing shortage. A far more effective solution would be to reform Internal Revenue Code Section 121 (the capital gains exclusion on the sale of a primary residence) to unlock existing housing inventory and give more Americans the opportunity to buy.

The Housing Inventory Shortage Is the Core Issue

America’s housing market in 2026 continues to struggle with chronic housing supply shortages due to:

Years of underbuilding
Zoning and permitting barriers
Rising construction costs and labor shortages
Inflation and limited resale inventory

Restricting who can buy homes does not increase supply; it only changes who competes for the limited homes already on the market. True affordability requires more homes for sale not just fewer buyers competing for them.

What President Trump Called for and Why It Matters

In early 2026, President Trump used social media and public statements to say he would ban large institutional investors from buying single-family homes, asserting that such a step would help improve housing affordability and expand opportunities for homebuyers.

While this proposal is timely and politically resonant, it does not directly expand the housing supply or encourage more homeowners to list their houses for sale. In fact, restricting certain buyers might inadvertently reduce market liquidity and slow housing turnover — precisely the opposite of what’s needed to make homes more affordable.

The Lock-In Effect: Why Homeowners Don’t Sell

One of the most significant but often overlooked issues in the housing market is the capital gains “lock-in effect” created by outdated rules in IRC Section 121.

Today, homeowners can exclude:

$250,000 in capital gains if single
$500,000 if married filing jointly

These thresholds were set in 1997 and have not kept pace with decades of home price appreciation. Many homeowners now have equity well above these limits. If they sell, they would face tax liabilities that make moving prohibitively expensive.

As a result, many homeowners:

Don’t downsize after retirement
Don’t relocate for family or work
Don’t sell to enter retirement communities
Don’t free up homes for move-up buyers or first-time buyers

This lock-in effect keeps millions of existing homes off the market and tightens inventory across all price ranges.

How Reforming Section 121 Would Increase Housing Inventory

Updating or expanding the primary residence capital gains exclusion would:

Encourage long-time homeowners to sell
Increase turnover of existing inventory
Reduce tax penalties for moving to a new home
Free up housing for both entry-level buyers and move-up buyers

This is where bipartisan policy action, like the proposed “More Houses on the Market Act” introduced by Representatives Mike Kelly and Jimmy Panetta, could make a real impact by modernizing the Section 121 exclusion. Reforming these limits aligns with broader efforts to get more homes on the market and promote housing mobility.

House Passes the Housing for the 21st Century Act

In February 2026, the House passed the Housing for the 21^st Century Act, a bipartisan package aimed at boosting housing supply and affordability. The legislation touches on zoning reform, access to capital, community development, and permitting modernization. These are important long-term fixes.

However, none of these supply-side reforms immediately unlock the millions of homes already owned but not listed for sale due to tax hurdles. Addressing the lock-in effect in Section 121 would do that.

What Lawmakers Are Talking About in 2026

A February 10^th hearing by the House Financial Services Committee, titled “Priced Out of the American Dream: Understanding the Policies Behind Rising Costs of Housing and Borrowing,” underscored the complexity of housing affordability. Lawmakers discussed:

Housing supply shortages
Borrowing and mortgage costs
Zoning and permitting reform
Federal housing programs
Capital access and community development

Both sides of the aisle acknowledged that supply side issues, not just demand-side restrictions, are central to solving affordability. This reinforces that smart market policy must expand inventory rather than simply limit who can buy homes.

Why Banning Institutional Buyers Alone Isn’t Enough

Even if a ban on large investors were enacted:

It would not create new homes for sale
It would not address why millions of existing homeowners are not listing their homes
It could reduce liquidity in some markets
It might diminish potential buyers who refurbish and return homes to the market

Policies aimed at housing affordability should encourage market participation, not limit it without compensating benefits.

The 1031 Exchange Perspective: Unlocking Economic Mobility

From a real estate investment standpoint, tools like Section 1031 exchanges enable investors to defer capital gains when reinvesting equity into new properties. This promotes liquidity and reinvestment, sustaining market activity.

Similarly, reform of Section 121, by reducing tax penalties on the sale of primary residences, would encourage homeowners to sell and reinvest in housing that better fits their life stages. Both reforms incentivize market mobility rather than freezing ownership based on tax consequences.

The Bottom Line for Housing Policy in 2026

Banning large institutional buyers, as President Trump has suggested, captures attention, but it does not solve the housing inventory crisis.

Real solutions lie in unlocking existing housing stock:

Modernize the Section 121 capital gains exclusion
Promote voluntary turnover of existing homes
Remove tax barriers that trap homeowners in place

If policymakers want to expand access to homeownership and improve affordability, they must focus on solutions that increase supply not simply restrict buyers.

1031 CORP. cannot provide tax or legal advice, but our knowledgeable Exchange Team is here to educate Exchangers and work with their advisors.

Warning: Do Not File Your 2025 Tax Return Before Your 1031 Exchange Is Complete

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Fri, 23 Jan 2026 16:44:55 GMT

Avoid costly mistakes when reporting your 1031 exchange.

As tax season approaches, one of the most common and costly mistakes 1031 exchangers make is filing their tax return before their exchange is complete. Doing so can result in unintended tax liability and the loss of valuable tax deferral benefits.

Once you file your federal or state tax return, your 1031 exchange period ends immediately. This means:

Your exchange will be considered incomplete, and you will have to pay capital gains tax on the sale of your relinquished property.
You CANNOT amend your tax return to retroactively report the exchange.
Your tax deferral is lost, and the sale must be reported as a taxable event.

What to do if your exchange extends past tax deadlines.

You must file for a tax extension, if your 1031 exchange extends beyond the standard tax filing deadline of April 15, 2026 (for individuals) or March 15, 2026 (for partnerships and corporations).

Filing an IRS extension (Form 4868) allows you to:

Preserve your full 180-day exchange period.
Delay your tax return filing until October 15, 2026 (for individuals) or September 15, 2026 (for partnerships and corporations).
Avoid an early termination of your exchange and an unexpected tax bill.

Remember, it is crucial that you do not file your tax return until your 1031 exchange is fully complete to avoid unintended tax consequences. If your exchange extends beyond the standard tax filing deadline, you should consider filing for an extension to preserve your full 180-day exchange period and maintain eligibility for tax deferral.

To ensure accurate reporting and compliance with IRS regulations, it is always advisable to consult your tax advisor before submitting your return. 1031 CORP.’s comprehensive 2025 Tax Reporting Guide provides step-by-step instructions for completing Form 8824 and understanding key reporting requirements.

Get Your Copy Today

1031 CORP. cannot provide tax or legal advice, but our knowledgeable Exchange Team is here to educate Exchangers and work with their advisors.

Completed a 1031 Exchange In 2025? Here's How to Report It On Your Tax Return.

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Fri, 23 Jan 2026 16:44:47 GMT

A 1031 exchange must be reported in the tax year when the original property (relinquished property) was sold—not when the replacement property was acquired.

If you completed a 1031 exchange in 2025, you must report it on your 2025 tax return—even if your replacement property was acquired in 2026. Properly completing IRS Form 8824 for like-kind exchanges is essential to ensuring your tax deferral is recognized by the IRS.

Required information for IRS Form 8824.

When completing Form 8824, you will need:

The original acquisition date of your relinquished property.
The date you sold your relinquished property (exchange start date).
The date you identified your replacement property.
The date you purchased/closed on your replacement property.
A detailed description of all properties included in the exchange.

Make sure these dates match your closing statements to ensure accuracy in your reporting.

Reporting interest earned on exchange proceeds.

If your exchange funds were held in an interest-bearing account, you should receive a Form 1099-INT from the financial institution where your funds were deposited. Any interest will need to be reported as ordinary income on your tax return. If your exchange spans two years, you will receive a 1099-INT for each year. Make sure to contact your Exchange Officer for assistance if you haven’t received your 1099-INT(s).

Exchanges with “Boot” received in the following tax year.

If your exchange started near the end of 2025, but was not completed until 2026…
You may have received cash “boot” or proceeds returned to you if not all exchange funds were reinvested into a replacement property. Under Treasury regulations, you may elect to report this boot gain on your 2026 tax return instead of 2025 by using the installment method outlined in Section 453 of the Internal Revenue Code. This method allows you to recognize the gain gradually as you receive payments, instead of all at once.

If your exchange fails entirely in 2026…
If no replacement properties were acquired in 2025, and all exchange proceeds are being returned to you, you can report the gain on your 2026 return provided you had a bona fide intent to complete the exchange when it began. If you choose the installment method, do not report the boot on Line 22 of Form 8824. Instead, file Form 6252 and follow the instructions for reporting a part exchange, part installment sale.

If your relinquished property was subject to debt that was paid off at closing…
Rev. Rul. 2003-56 clarifies that the excess of your relinquished property debt over your replacement property debt is treated as money received in the year of sale for installment reporting. While this ruling focused on partnerships, it applies to individual taxpayers as well. Using the installment method is an optional election, and you should consult your tax advisor to determine whether this option makes sense for your specific situation.

State tax considerations for 1031 exchanges.

As of January 1, 2023, all states with an income tax either mirror the federal tax code or have adopted their own 1031 exchange rules. However, some states have unique requirements:

Pennsylvania now conforms to federal 1031 rules (previously, it taxed exchange gains).
California, Massachusetts, Montana, and Oregon have claw-back rules, taxing gains on out-of-state exchanges.
States with non-resident withholding tax may still require filing a state return, even if you qualify for an exemption.

To ensure compliance with both federal and state regulations, it is always best to consult your tax advisor for guidance on reporting your 1031 exchange correctly. By properly reporting your exchange, you can maintain compliance with IRS regulations and continue deferring capital gains taxes on your investment properties, maximizing the benefits of your transaction.

1031 CORP. offers a comprehensive 2025 Tax Reporting Guide, which provides step-by-step instructions for completing Form 8824 and understanding key reporting requirements.

Get Your Copy Today

1031 CORP. cannot provide tax or legal advice, but our knowledgeable Exchange Team is here to educate Exchangers and work with their advisors.

35 Years Strong: Why 1031 Exchanges and 1031 CORP. Are Good for the U.S. Economy

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Tue, 06 Jan 2026 21:57:24 GMT

As 1031 CORP. celebrates its 35th anniversary, it is an ideal time to reflect on the enduring economic importance of Internal Revenue Code Section 1031 (“IRC §1031”) and the role like-kind exchanges play in strengthening the U.S. economy. For more than a century, like-kind exchanges have encouraged reinvestment in business and investment use real property, keeping capital in motion, supporting jobs, and driving economic growth. For 35 years, 1031 CORP. has helped real estate investors and business owners pursue new opportunities with confidence, clarity, and peace of mind.

Founded in 1991, alongside the modern evolution of the 1031 exchange industry, 1031 CORP. has built its reputation on a restless pursuit of opportunities for clients, a deeply client-focused exchange experience, and an unwavering commitment to transparency and security of exchange funds—values that continue to differentiate the company in an increasingly complex marketplace.

What Is an IRC §1031 Like-Kind Exchange?

An IRC §1031 like-kind exchange allows owners of real estate held for investment or business purposes to defer capital gains taxes when selling property and reinvesting the proceeds into other like-kind real estate. By preserving equity that would otherwise be lost to immediate taxation, 1031 exchanges enable investors to reinvest more equity into replacement properties supporting continued growth and the growth of their real estate portfolio with pre-tax dollars.

By reducing friction in the real estate marketplace, IRC §1031 encourages investors to reinvest, reposition assets, and respond to changing market conditions rather than remain locked into properties that no longer meet their strategic goals.

The Significance of the 1991 Final Regulations

A pivotal milestone in the modern use of 1031 like-kind exchanges came with the issuance of the Treasury Department’s Final Regulations in 1991. These regulations formally recognized the role of the Qualified Intermediary (QI) and established a clear framework for deferred exchanges—providing structure and consistency that helped expand the use of 1031 exchanges nationwide.

1031 CORP. was founded in 1991, the same year these regulations took effect. Over the past 35 years, the company has grown alongside the industry, helping investors adapt to new markets, new property types, and new opportunities while maintaining a steadfast focus on client experience and trust.

How IRC §1031 Benefits the U.S. Economy

Encouraging Reinvestment and Capital Mobility: 1031 exchange promotes continuous reinvestment by reducing the barriers associated with selling and reinvesting real estate. Instead of delaying transactions, investors are empowered to move capital into properties that better align with current economic demands fueling real estate activity and efficient capital allocation across markets.

Supporting Jobs, GDP, and Local Economies: Every 1031 exchange generates economic activity well beyond the properties involved. Reinvested proceeds support real estate brokers, lenders, attorneys, title and escrow professionals, contractors, engineers, and countless small businesses. This ripple effect contributes directly to job creation, wage growth, and U.S. GDP. Independent economic studies consistently show that while limiting IRC §1031 might appear to generate additional tax revenue, any incremental revenue would be far outweighed by losses in GDP, employment, and overall economic activity. Fewer exchanges would mean fewer transactions, less reinvestment, and a smaller tax base over time.

Modernizing Real Estate and Revitalizing Communities: 1031 exchanges allow investors to transition out of older or underutilized properties and reinvest in assets that better meet today’s needs, such as upgraded housing, industrial and logistics facilities, medical offices, and mixed-use developments. This reinvestment supports modernization, redevelopment, and long-term community vitality. This has been especially beneficial as the commercial real estate market recovers from the slow down after the pandemic.

Keeping Capital Invested in the United States: To qualify for tax deferral under IRC §1031, exchange proceeds must be reinvested in U.S. real estate. This requirement helps ensure that capital remains invested domestically supporting American jobs, infrastructure, and local tax bases.

35 Years of Growth: A Firsthand Perspective

Over the past 35 years, Margo McDonnell and the team at 1031 CORP. have witnessed firsthand the steady expansion and growing use of 1031 exchanges, particularly on the East Coast. What began in the early 1990s as a specialized planning tool has evolved into a widely used strategy for investors ranging from individual property owners to sophisticated real estate portfolios.

This growth reflects the durability of Section 1031 and its essential role in helping investors adapt, pursue opportunity, and remain active participants in real estate ownership and the U.S. economy.

Transparency, Security, and Peace of Mind

Beyond economic impact, trust and security are foundational to a successful 1031 exchange. 1031 CORP. has long set itself apart through industry-leading safeguards designed to provide clients with confidence throughout the exchange process.

Exchange funds are held in segregated, client-specific accounts titled for the benefit of the client, with clients able to view their account activity directly through the bank’s website. In addition, clients receive mailed monthly statements directly from the bank, reinforcing transparency and providing an added layer of reassurance. This commitment to openness reflects 1031 CORP.’s belief that peace of mind is just as important as performance.

A Proven Engine of Economic Growth

The economic benefits of like-kind exchanges extend far beyond individual transactions. The reinvestment activity it supports generates significant tax revenue through income taxes, property taxes, transfer taxes, and sales taxes, while sustaining jobs and economic momentum across industries.

As the U.S. economy continues to evolve, Section 1031 remains a proven driver of reinvestment, growth, and opportunity. For 35 year and counting, 1031 CORP. has been proud to help investors pursue what’s next, supporting strong markets, vibrant communities, and a resilient U.S. economy.

Ready to start your exchange?
Contact our experienced exchange team today and discover why investors across the country trust 1031 CORP. to protect their equity, defer their taxes, and grow their portfolios. Call 800.828.1031 or contact us online.

Use Like-Kind Flexibility to Achieve Your 2026 Investment Goals

margo@1031corp.com (Margo McDonnell, CRE, CES®) — Wed, 17 Dec 2025 19:14:17 GMT

How Strategic 1031 Exchange Planning Preserves Equity and Builds Long-Term Wealth

As real estate investors plan for 2026, strategic use of a 1031 exchange remains one of the most effective ways to defer capital gains taxes, preserve equity, and reposition real estate investment portfolios for long-term growth.

Markets change. Opportunities shift. Investors who plan ahead maintain the flexibility to act without sacrificing equity to unnecessary taxes.

At 1031 CORP., we believe a 1031 exchange is not simply a transaction. It is a long-term planning strategy grounded in the concept of continuity of investment, allowing investors to move from one opportunity to the next while keeping equity fully deployed and working toward clearly defined goals.

What Is a 1031 Exchange?

A 1031 exchange is a real estate tax-deferral strategy under Section 1031 of the Internal Revenue Code that allows investors to sell property held for investment or business use and reinvest the proceeds into like-kind replacement property while deferring federal and state capital gains taxes and depreciation recapture.

By postponing tax recognition, investors retain more equity to reinvest, increasing purchasing power and accelerating portfolio growth over time.

Why 1031 Exchange Strategies Matter for Real Estate Investors

A taxable sale often results in a significant loss of equity to capital gains taxes, depreciation recapture, and state income taxes. A properly structured 1031 exchange allows investors to defer those taxes and preserve equity that can be reinvested immediately.

Over time, preserved equity can result in:

Increased buying power
Higher-quality replacement properties
Improved cash flow
Enhanced long-term appreciation
Greater portfolio flexibility

When used repeatedly, 1031 exchanges allow investors to build real estate portfolios with pre-tax equity, compounding growth and creating long-term wealth.

What Qualifies as Like-Kind Property in a 1031 Exchange?

One of the most powerful benefits of a 1031 exchange is the broad definition of like-kind real estate.

In real estate, like-kind refers to the use of the property, not the specific type. As long as property is held for investment or productive use in a trade or business, it can generally be exchanged for other real property with the same intent.

Common Like-Kind Exchange Scenarios Include:

Residential rental property exchanged for commercial or industrial property
Raw land exchanged for income-producing real estate
One property exchanged for multiple replacement properties
Multiple properties consolidated into a single, higher-value asset
Repositioning into different geographic markets

This flexibility allows investors to make decisions based on strategy and performance, rather than being constrained by property classifications.

How 1031 Exchanges Preserve Equity and Increase Buying Power

One of the most immediate advantages of a 1031 exchange is the ability to reinvest all net equity rather than paying a portion to taxes at sale.

By preserving equity, investors often:

Qualify for larger acquisitions
Generate higher rental income from day one
Increase depreciation deductions
Improve long-term appreciation potential

Simply put, more equity working means more opportunity created.

Using 1031 Exchange Planning to Reposition Your Portfolio for 2026

Strategic 1031 exchange planning allows investors to proactively adjust portfolios to meet evolving goals.

Common 2026 Planning Objectives Include:

Moving out of management-intensive properties
Rebalancing asset types or geographic exposure
Consolidating or diversifying holdings
Increasing passive income streams
Preparing for retirement or generational wealth transfer

A well-timed exchange allows investors to reposition without interrupting growth or eroding equity.

Advanced 1031 Exchange Strategies for Complex Transactions

Not all transactions fit neatly into a standard exchange structure. Market conditions, inventory shortages, or timing challenges may require additional planning.

Advanced 1031 exchange strategies, such as reverse exchanges, improvement exchanges, or passive replacement structures, can provide solutions when flexibility is critical. These strategies require careful coordination and early involvement of experienced professionals, but they can unlock opportunities that would otherwise be lost.

1031 Exchange Rules, Timelines, and Planning Considerations

While 1031 exchanges offer significant flexibility, the rules are strict:

Replacement property must be identified within 45 days
The exchange must be completed within 180 days

Missing deadlines or structuring errors can trigger immediate tax liability and unnecessary loss of equity. This is why engaging 1031 CORP. early in the process is essential to a successful exchange.

Using 1031 Exchanges for Long-Term Wealth and Estate Planning

For many investors, 1031 exchanges also support estate and legacy planning strategies.

By deferring gains throughout life, investors may pass real estate to heirs with a stepped-up basis, potentially eliminating deferred taxes altogether. Preserving equity during life can create meaningful benefits for future generations, making thoughtful planning especially important as investors look toward 2026 and beyond.

Why Real Estate Investors Choose 1031 CORP.

At 1031 CORP., we believe knowledge creates opportunity. Our role extends beyond facilitating exchanges—we help investors think strategically, understand their options, and align each exchange with broader financial objectives.

With decades of experience, a commitment to education, and a focus on stewardship, we guide investors through both straightforward and complex 1031 exchanges while helping protect the equity they’ve worked hard to build.

Looking Ahead to 2026

The most successful real estate investors don’t wait for deadlines to dictate decisions. They plan early, stay informed, and use 1031 exchange strategies intentionally.

As you define your 2026 real estate investment goals, consider how the flexibility of like-kind exchanges can help you preserve equity, reposition your portfolio, and continue building long-term wealth strategically and efficiently.

Planning to sell investment property in 2025 or 2026? The time to start the conversation is now. Contact the exchange experts at 1031 CORP. to discuss your goals and explore how a 1031 exchange strategy can support your long-term real estate plan.