1031 Exchange

A 1031 exchange — named for IRC Section 1031 — allows real estate investors to defer capital gains taxes and depreciation recapture when selling investment property, as long as proceeds are reinvested into like-kind replacement property through a Qualified Intermediary. The exchange must be completed within 180 days of the relinquished property closing.

Yes. Washington State conforms to the federal 1031 exchange rules under IRC §1031. There is no separate Washington State 1031 approval required. However, Washington REET (Real Estate Excise Tax) is still owed on the sale of the relinquished property — 1031 exchanges are not exempt from REET in Washington State.

Nearly any investment or business-use real property in the United States qualifies, including retail centers, office buildings, industrial facilities, apartment buildings, raw land, and NNN leases. Your primary residence does not qualify. The property must be held for investment or productive use in a trade or business.

You have exactly 45 calendar days from the close of the relinquished property sale to identify potential replacement properties in writing to your Qualified Intermediary. This deadline cannot be extended regardless of weekends, holidays, or unforeseen circumstances.

Yes. A fully executed 1031 exchange defers both capital gains tax and depreciation recapture (§1250). The recapture is not eliminated — it carries forward as a reduction in the replacement property's basis — but it is deferred until a taxable sale occurs.