1031 Exchange Requirement in NYC

In 2025, the essential requirements for a 1031 exchange continue to allow for the deferral of capital gains tax when exchanging qualifying real property. Strict adherence to deadlines and regulations is essential. 
Key Requirements
    • Like-Kind Property: Both the property sold and the property acquired must be real property held for investment or business use. Personal residences do not qualify.
    • Qualified Intermediary (QI): A QI is required to hold the sale proceeds in escrow to avoid the taxpayer having access to the funds during the exchange.
    • Value Requirement: To achieve a full tax deferral, the replacement property’s value and the equity reinvested must be equal to or greater than the relinquished property. Receiving cash or non-like-kind property (“boot”) is a taxable event.
    • Same Taxpayer: The ownership entity must remain the same for both properties.
  • Reporting: The exchange is reported on IRS Form 8824. 
Strict Timelines
Two deadlines apply, starting from the closing date of the relinquished property: 
  • 45-Day Identification Period: Potential replacement properties must be identified in writing within 45 days.
  • 180-Day Exchange Period: The replacement property must be acquired within 180 days or by the tax return due date (with extensions). 
Identification Rules
When identifying multiple properties, one of these rules must be followed: 
  • 3-Property Rule: Up to three properties can be identified regardless of value.
  • 200% Rule: More than three properties can be identified if their total value is within 200% of the relinquished property’s value.
  • 95% Rule: An unlimited number of properties can be identified, provided at least 95% of the total value is acquired. 
2025 Considerations
  • Tax Reform: Section 1031 for real estate is expected to remain in place.
  • Related Parties: Exchanges with related parties face increased scrutiny and require a two-year holding period.
  • Reporting: New regulations may require more detailed reporting. 
Consult with a tax advisor or Qualified Intermediary for specific guidance.