Section 1031 of the Internal Revenue Code lets an investor who sells real property held for investment, and buys like-kind real property, defer the gain. Two numbers decide whether it works: 45 days to identify the replacement in writing, and 180 days to close on it. A condo adds a third clock, set by the building's own documents.
Below, one hypothetical investor goes from a $1,500,000 sale to a $1,800,000 condo. This is general information; check each step with your CPA, attorney and qualified intermediary.
What qualifies
Since the Tax Cuts and Jobs Act (Public Law 115-97, section 13303, December 22, 2017), section 1031 covers only real property held for business use or investment (IRS, Instructions for Form 8824, 2025). A Fort Lauderdale rental house or an out-of-state duplex can be exchanged for a condo you will rent out. Your own home cannot, and neither can a flip.
A condo you also plan to use yourself is a gray zone. Rev. Proc. 2008-16 (Internal Revenue Bulletin 2008-10, March 10, 2008) gives a safe harbor: own the unit at least 24 months after the exchange, and in each of those two 12-month periods rent it at a fair rental for 14 days or more, with personal use no higher than the greater of 14 days or 10% of the days rented. Outside it, the test is your intent, which your CPA will want documented.
The clock, with dates
Section 1031(a)(3) counts from the day you transfer the property you sell. You identify the replacement by day 45 and must receive it by the earlier of day 180 or your tax return due date, with extensions, for the year of the sale. In our hypothetical, a Fort Lauderdale rental closes on Monday, November 16, 2026.
| Milestone | Hypothetical date | Rule |
|---|---|---|
| Sale closes, proceeds go to the QI | Nov 16, 2026 | Day 0 |
| Written identification delivered | by Dec 31, 2026 | Day 45, IRC 1031(a)(3)(A) |
| 2026 federal return due unless extended | Apr 15, 2027 | IRC 1031(a)(3)(B)(ii) |
| Replacement condo closes | by May 15, 2027 | Day 180, only if the return is extended |
The trap is row three. After a late autumn sale the return is due before day 180, so without an extension (IRS Form 4868 for individuals) the exchange period ends in April. Day 45 here is New Year's Eve, a hard week to reach sellers, associations and lenders.
What the qualified intermediary does
You cannot touch the sale proceeds. Treas. Reg. 1.1031(k)-1(g) lets a qualified intermediary (QI) hold the money, take an assignment of both contracts and wire funds to the condo closing. Paragraph (k)(2) disqualifies anyone who acted as your attorney, accountant, broker or real estate agent in the two years before the sale, so your agent, including us, cannot be your QI. Engage the QI before the sale closes.
Identification is a signed written document delivered to the QI or another permitted party by day 45, describing the property unambiguously by legal description, street address or a distinguishable name (Reg. 1.1031(k)-1(c)(3)). For a condo, give the unit number. You may name three properties of any value, or more if their total stays within 200% of what you sold (Reg. 1.1031(k)-1(c)(4)). On a $1,500,000 sale that ceiling is $3,000,000, so three $1.8M condos fit only under the three-property rule.
The worked pro forma
Hypothetical inputs: sale price $1,500,000, adjusted basis $700,000, mortgage paid off $500,000. Selling costs are left out for readability; on Form 8824 line 15 exchange expenses reduce cash boot. That leaves $1,000,000 with the QI and a realized gain of $800,000.
Boot is anything you receive besides like-kind property: cash, or net relief from debt. Gain is recognized up to the boot (Form 8824 instructions, line 15). Cash you add can offset debt you shed. A bigger loan cannot offset cash you take out.
| Hypothetical scenario | A: $1.8M with loan | B: $1.8M, $150K out | C: $1.8M all cash | D: $1.3M trade down |
|---|---|---|---|---|
| QI cash into purchase | $1,000,000 | $850,000 | $1,000,000 | $1,000,000 |
| New mortgage | $800,000 | $950,000 | $0 | $300,000 |
| Outside cash added | $0 | $0 | $800,000 | $0 |
| Boot | $0 | $150,000 cash | $0 | $200,000 debt relief |
| Gain recognized now | $0 | $150,000 | $0 | $200,000 |
| Gain deferred | $800,000 | $650,000 | $800,000 | $600,000 |
| Basis in the condo | $1,000,000 | $1,150,000 | $1,000,000 | $700,000 |
Scenario D is the quiet mistake: paying off a $500,000 mortgage and taking a $300,000 one leaves $200,000 of debt relief taxable, though every QI dollar went into the new unit. The part of recognized gain that reflects past depreciation (unrecaptured section 1250 gain) is taxed at up to 25% (IRS Tax Topic 409, updated September 24, 2026).
Replacing debt takes a lender who can close inside the window on a unit the building will approve. Our mortgage partner, Irina Slyusarchuk of AD Mortgage, can review the loan side before day 45; ask us for the introduction.
Florida costs at the condo closing
Florida levies no income tax on resident natural persons (Florida Constitution, Article VII, section 5(a)), but the state where your sold property sits may. California requires form FTB 3840 every year after you exchange California property for out-of-state property (Franchise Tax Board, FTB 3840 instructions, 2025).
Outside Miami-Dade, deed documentary stamp tax is 70 cents per $100 (s. 201.02, Florida Statutes 2026): $12,600 on a $1,800,000 condo. A new mortgage adds 35 cents per $100 (s. 201.08) and a 2 mill intangible tax (s. 199.133): $2,800 and $1,600 on an $800,000 loan. Miami-Dade uses a different deed rate; your closing attorney will confirm it. Ask your QI and CPA before paying loan costs from exchange funds.
A purchase is also a change of ownership under s. 193.1555, so the condo is reassessed at just value the next January 1 and the 10% non-homestead cap restarts. Our Florida property tax guide explains the bill.
The condo clock
Rental rules. A declaration can set minimum lease terms or cap leases per year. Under s. 718.110(13), a rental amendment binds owners who consent and anyone who takes title afterward, so a buyer takes the current rules. A unit you cannot rent at a fair rental is hard to defend as held for investment.
Association approval. If the declaration requires board approval of a sale or lease, the review period is written there. Read it before day 45 and request the application package that week.
Reserves and inspections. SB 4-D (chapter 2022-269, Laws of Florida) created milestone inspections and structural integrity reserve studies. A resale buyer is entitled to the milestone summary and latest reserve study, and the contract gives 7 days, excluding weekends and legal holidays, to cancel after receiving the core documents unless they arrived that long before signing (s. 718.503(2), Florida Statutes 2026). A planned assessment changes the cash you need at closing.
Pre-construction runs into the 180-day limit. Reg. 1.1031(k)-1(e) allows property still being built, but only what you receive within 180 days counts, so a unit delivering in 2028 cannot complete a 2026 exchange. Our pre-construction deposits guide covers that path.
FAQ
Can I move into the condo later? A move-in affects how the exchange holds up, and section 121(d)(10) denies the home sale exclusion on exchanged property sold within 5 years of acquisition. Plan it with your CPA first.
Do weekends extend the 45 or 180 days? The statute counts calendar days and has no weekend or holiday extension. A federally declared disaster can postpone deadlines; ask your QI.
Can I buy from a relative? Related party exchanges fall under section 1031(f), and a disposition by either side within 2 years can undo the deferral. Talk to your attorney first.
Can SunSt act as my QI? No. As your agent we are a disqualified person. We coordinate dates and documents with the QI you hire.
Send us the property you plan to sell
Send us its address and target closing date. We will map replacement condos in your price range against the 45-day window, with each building's rental rules and approval terms in writing and a closing cost sheet. If it is a $1M+ home in the Fort Lauderdale area, we can list it and time the closing so day 45 avoids the holidays. SunSt agents have closed more than $150M in combined volume across 125+ transactions. Book a call or see how we work with investors.