Florida 1031 Exchange

Both properties must be qualifying real property held for investment or productive use in a trade or business. Like-kind refers to nature or character, so different types of real estate can qualify. Property held primarily for sale does not qualify. U.S. real property is not like-kind to property outside the United States. Review ownership, use and any related-party involvement before committing.

A property used only as your personal residence does not qualify under Section 1031. Mixed-use, converted rental and vacation properties need a separate review of actual use and the applicable rules. A home-sale gain exclusion is a different provision. Do not assume occasional rental activity makes a personal-use home eligible.

In a typical deferred exchange, replacement property must be identified within 45 days after the transfer of the property you give up. Generally, identification must be in a signed written document delivered to a permitted party. Property received within that period is treated as identified. Acquisition must occur by the earlier of 180 days after the transfer or the tax return due date, including extensions. Missing an applicable deadline generally prevents deferred-exchange treatment. Ask whether specific IRS relief applies; do not assume extra time is available.

Florida does not impose personal income tax, including a capital gains tax on individuals. Federal tax rules still apply, and Florida corporate income tax may apply to corporations and entities taxed as corporations. Another state's tax rules may matter depending on the property and taxpayer. Review the ownership structure, property locations and any taxable portion of the exchange rather than assuming the transaction is tax-free.

Discuss backup properties during the identification period. The three-property rule allows up to three identified properties regardless of value; alternative identification rules may allow more, subject to their limits. After the identification period ends, you generally cannot substitute a newly identified property. A failed purchase does not automatically extend the acquisition deadline. Contact your qualified intermediary and tax adviser promptly to review remaining options and potential taxable gain.