Guide
1031 exchanges for landowners selling ground
A 1031 exchange can defer tax on land held for business or investment if you use a qualified intermediary and meet the IRS 45-day and 180-day deadlines.
By Jordan Johnson, Founder, Kedron Co.Updated 7 min read
A 1031 exchange lets you put off paying tax on the gain from selling land you held for business or investment, as long as you buy like-kind real property and follow the IRS rules: a qualified intermediary holds the money, you identify replacement property within 45 days, and you close on it within 180 days or by your tax return due date, whichever comes first. Miss a step and the exchange can fail.
This guide explains the rules in plain terms, using only what the IRS publishes, so you can have a better first conversation with your tax professional. It is not tax advice. Whether an exchange makes sense for your land, and how to do it, is a question for a CPA or tax attorney and a qualified intermediary. It's part of our closing deals library.
What is a 1031 exchange?
Section 1031 of the tax code lets you exchange one piece of business or investment real property for another of like kind and defer the gain. Since Jan. 1, 2018, "Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property" (IRS, Like-Kind Exchanges: Real Estate Tax Tips, page reviewed May 1, 2026). Machinery and equipment no longer qualify.
The key word is defer. An exchange puts the tax off. It doesn't erase the gain.
Does my land qualify?
The land you sell and the land you buy both have to be held for use in a business or for investment.
What can qualify:
- Farmland you farm or rent out.
- Timberland held for investment.
- Land held for investment, including recreational ground, if that's truly how you hold it.
What doesn't qualify:
- "Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify" (IRS Fact Sheet FS-2008-18, Feb. 2008).
- "Section 1031 doesn't apply to exchanges of real property held primarily for sale" (IRS 2025 Instructions for Form 8824, page reviewed April 30, 2026).
- "Real property in the United States is not like-kind to real property outside the United States," per the same IRS real estate tax tips page.
Hunting land deserves an honest conversation with your tax professional. Land you hold as an investment and also hunt is a different fact pattern from a cabin and 40 acres you use mostly for your own family's weekends. Bring the facts: how you've used it, any lease or farm income, and how you've reported it.
What counts as like-kind: The IRS says "properties are of the same nature or character, even if they differ in grade or quality." Its fact sheet gives an example: "real property that is improved with a residential rental house is like-kind to vacant land." Selling farmland doesn't mean you have to buy farmland. The replacement can be other business or investment real property in the U.S.
What are the 45-day and 180-day deadlines?
The two deadlines run at the same time, both starting the day you sell.
| Deadline | The rule | Source |
|---|---|---|
| Day 45 | Identify possible replacement properties in writing | IRS FS-2008-18; 26 CFR 1.1031(k)-1 |
| Day 180, or earlier | Receive the replacement property by the earlier of 180 days after the sale or your tax return's due date (with extensions) for the year of the sale | IRS FS-2008-18; 26 CFR 1.1031(k)-1 |
The regulation spells it out: the identification period "ends at midnight on the 45th day," and the exchange period "ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions)" of your return (26 CFR 1.1031(k)-1, eCFR current as of Sept. 28, 2026).
Why a fall or winter sale needs extra care. Say you close on Dec. 1, 2026. Day 45 is Jan. 15, 2027. Day 180 is May 30, 2027. But if your return for 2026 is due in April 2027 and you don't extend it, the return due date comes first and your exchange period ends then. Ask your tax professional whether to file an extension. Farm sales that close after harvest can run into this.
How identification works
Identification has to be "designated as replacement property in a written document signed by the taxpayer" and sent to a person involved in the exchange, such as your intermediary. A phone call or a note on your kitchen table doesn't count.
You can identify either:
- Three properties, regardless of their value, or
- Any number of properties, as long as their total fair market value doesn't exceed 200% of the value of what you sold.
Your intermediary and tax professional can explain the other rules that apply if you go over those limits.
Who can be the qualified intermediary?
You can't hold the sale money yourself. The IRS is direct about who can't hold it for you either:
"You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator" (IRS FS-2008-18, Feb. 2008).
That means the agent listing your land can't be your intermediary, and neither can the attorney or accountant who has worked for you in the last two years. The current regulation, 26 CFR 1.1031(k)-1, sets out who counts as a "disqualified person." Ask your tax professional to confirm that the intermediary you choose isn't one.
The same fact sheet warns that "taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable." The money from your sale goes to the intermediary at closing, not to you.
Choose the intermediary before the sale closes. Your tax professional or attorney can help you find one, and your agent can coordinate with them on the closing paperwork.
What makes part of the gain taxable?
Not every exchange defers everything. According to the IRS fact sheet, "if you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange." This extra is often called boot.
Situations to ask your tax professional about:
- Keeping some of the sale money instead of putting it all into the replacement.
- Buying replacement property worth less than what you sold.
- Paying off a mortgage on the land you sold without taking on similar debt on the replacement.
Exchanges with related parties have their own rules. The Form 8824 instructions say that if either party disposes of the property within 2 years after the exchange, the deferred gain generally has to be reported in the year of that disposition, unless an exception applies. You report every exchange on Form 8824 with your return for the year of the exchange.
Selling to a farmer? Ask about section 1062
If you're selling farmland to someone who farms it, ask your tax professional about a separate, newer option. For tax years beginning after July 4, 2025, section 1062 lets a seller "elect to pay the net income tax attributable to gain from the sale or exchange of qualified farmland property to a qualified farmer in four equal annual installments" (IRS Instructions for Form 1062, Dec. 2025).
It has strict conditions. The land must have been farmed by you, or leased by you to a qualified farmer, "during substantially all of the 10-year period" before the sale, and it must be subject to a covenant that restricts it to farming for 10 years after. This is not a 1031 exchange. It spreads out the payment of tax rather than deferring the gain into new property. Whether it fits your sale is a question for your tax professional.
Questions to bring to your tax professional
Take these to a CPA or tax attorney before you sign a purchase agreement:
- Does my land qualify as held for business or investment, given how I've used it?
- What would I owe if I sold without an exchange, and what would an exchange defer?
- Do I have replacement property in mind, and can I realistically identify it in 45 days?
- Does my likely closing date put the 180-day window up against my tax return deadline?
- Is any debt on the land going to create taxable boot?
- Am I selling to or buying from a relative or related entity?
- If I'm selling farmland to a farmer, should I look at section 1062 instead?
- Which qualified intermediary do you recommend, and when do we sign their agreement?
What to do next
If an exchange is on the table, tell your agent at the start so the closing date and paperwork can be planned around it. If you're still deciding how to sell, see land auction or listing, since the method sets how much control you have over the closing date. And for a realistic sale price to take to your tax professional, see what is my land worth.
