Understanding 1031 Exchanges: A Strategic Guide for Today’s CRE Investor

In a recent episode of the CRE with CBC Worldwide Podcast – Conversations With Dan Edition, host Dan Spiegel sat with Aaron Kancevicius, co-founder of 1031 Specialists. Aaron is a nationally recognized expert and Qualified Intermediary (QI) known for guiding real estate investors through tax-deferred 1031 exchanges. With over 20 years of experience, he is recognized for expertise in complex exchange structures, compliance, and educating Realtors to help clients maximize ROI and defer capital gains taxes. 

A 1031 exchange allows investors to defer capital-gains taxes when selling an investment property and reinvesting the proceeds into another qualifying asset. This powerful tax provision supports long-term portfolio growth, enhances reinvestment capital, and provides investors with greater flexibility to scale.

Despite periodic political discussions around potential changes, the recent tax bill left 1031 exchanges intact which is good news for investors and CRE professionals who rely on these rules to structure efficient transactions.

The Golden Rule: Plan Early

Timing can make or break a 1031 exchange. Investors must meet two strict IRS deadlines:

• 45 days to identify replacement properties
• 180 days to close on one or more of those properties

These are calendar days—not business days—and the countdown starts the moment the relinquished property closes.

The Role of the Qualified Intermediary

In a compliant 1031 exchange, the seller cannot touch the sale proceeds. Instead, funds must be held by a Qualified Intermediary (QI). A QI, often called an exchange facilitator or accommodator, is a neutral third party essential for executing a Section 1031 tax-deferred exchange. They legally hold proceeds from the sale of an investment property, preventing the taxpayer from receiving them directly, which allows for the deferral of capital gains taxes.

What Counts as “Like Kind”? More Than You Think

A common misconception is that “like kind” means swapping the same type of property. Under IRS rules, like-kind simply means real property held for investment. This flexibility allows exchanges from retail to industrial, multifamily to medical office, land to self storage, and many combinations in between. This broad definition gives investors significant room to diversify, upgrade, or rebalance their portfolios.

When the Numbers Don’t Match: DSTs and Other Options

What happens if your replacement property doesn’t match the exact value of your sale? 

• If the replacement is lower: Investors can roll leftover funds into a Delaware Statutory Trust (DST) to preserve tax benefits or choose to pay tax on the difference.
• If the replacement is higher: Investors can simply add cash to complete the purchase. This doesn’t break the exchange, in fact, it’s common.

DSTs also serve as a backup if identified properties fall through, offering investors a safety net under tight deadlines.

The experts emphasize the importance of assembling the right team: brokers, QIs, tax advisors, attorneys, and lenders all contribute to a smooth, profitable exchange.

As the CRE market enters a period of cautious optimism, the ability to execute smart, tax efficient trades matters more than ever.

Listen to the entire podcast episode here.