What the 1031 exchange calculator measures
Section 1031 can defer gain when qualifying U.S. real property held for investment or business use is exchanged for qualifying like-kind real property. Deferral is not the same as eliminating gain: the deferred amount generally carries into the basis of the replacement property and can affect a later disposition.
The result panel keeps four concepts separate. Realized gain measures the economic gain in the entered relinquished property. Recognized gain is the portion estimated as currently reportable because of boot. Deferred gain is the remainder, and replacement basis is the entered replacement value reduced by that deferred gain.
Cash boot, other property, and mortgage boot
Cash received and the fair market value of property that is not like-kind are potential boot. Debt also matters: liabilities transferred to the other party can create boot to the extent they exceed liabilities you assume and additional cash you pay. The calculator shows that positive net liability relief separately.
Taking on more replacement debt does not by itself erase cash boot. The Form 8824 computation nets specified liabilities and payments, while cash and other non-like-kind property remain part of the calculation. Enter the actual settlement structure rather than comparing only the two purchase prices.
Which exchange expenses belong in the input
Use only expenses your tax adviser treats as exchange expenses in the Form 8824 computation. IRS basis guidance distinguishes qualifying exchange expenses from items such as property-tax or rent prorations, security deposits, financing charges, and repairs. A closing statement total should therefore not be copied into this field without classification.
The model reduces estimated realized gain and potential boot by the entered eligible amount without allowing either result to fall below zero. It does not decide whether a particular intermediary, legal, title, broker, loan, or settlement charge qualifies.
Timing and property eligibility still require review
For a deferred exchange, IRS instructions generally require written identification of replacement property within 45 days and receipt within 180 days or the return due date including extensions, whichever is earlier. These are calendar and documentation tests, not dollar formulas, so they are intentionally outside this calculator.
Since 2018, section 1031 generally applies only to real property held for business or investment, not inventory held primarily for sale. U.S. and foreign real property are not like-kind to each other. Related parties, personal use, incidental personal property, and multiple asset groups can change reporting.
How to review the estimate before filing
Reconcile the entered fair market values, cash, debt assumed or relieved, and additional cash paid to the purchase and sale settlement statements. Then compare the estimate with lines 15 through 25 of the current Form 8824 instructions. An inconsistent exchange balance can still produce a mathematical answer but not a reliable filing number.
Use the copied calculation link to preserve the scenario for discussion with the qualified intermediary and tax preparer. Form 8824, depreciation recapture, state reporting, and any section 121 interaction should be completed from the transaction documents, not from this screening result alone.
Reviewed methodology and sources
The methodology is reviewed for the stated version. The result remains a scenario estimate and depends on the inputs and applicable rules.
1031 Exchange Calculator FAQ
What is boot in a 1031 exchange?
Boot is money or non-like-kind property received in addition to like-kind real property. Net liability relief can also be treated as boot. The calculator combines those entered items and reduces the amount by entered eligible exchange expenses.
Does buying a more expensive property guarantee full deferral?
No. Replacement value is only one part of the transaction. Cash received, non-like-kind property, debt relief, expenses, eligibility, timing, and recapture rules can still produce current recognition.
How are mortgages handled?
The model treats liabilities transferred to the other party as potential boot only to the extent they exceed replacement liabilities assumed and additional cash paid. It does not classify recourse, nonrecourse, or shared liabilities.
Are closing costs always exchange expenses?
No. IRS guidance distinguishes exchange expenses from financing items, prorations, deposits, repairs, and other settlement entries. Enter only the amount confirmed as eligible for this computation.
Does this calculator file Form 8824?
No. It is a one-property screening model. Form 8824 also asks for dates, relationships, asset classes, recapture, and other facts that require the return and supporting records.
Continue the property analysis
Compare this result with adjacent metrics, keeping each formula’s income, expense, and financing scope consistent.