The only property considered “identical” for the purposes of the exchange is real estate or property related to the country or structure. This is an important point, because equipment and work are not considered real estate. Therefore, all materials must be mounted on the structure to be considered real estate and must be paid during the replacement period or if the EAT holds ownership of the replacement property. Since building materials cannot simply be delivered to the site, but must actually be installed to qualify for exchange 1031 purposes, an important consideration for an exchanger is whether the general contractor or other body that can implement the improvements can make a sufficient amount of improvements to the replacement property to defer the entire capital gains tax and depreciation. nt of the exchanger. Like all scholarships, an exchange of improvements must be completed within 180 days, but the entire construction does not need to be completed during this period. Construction of improvements can continue after the 180th calendar day, although such improvements do not defer capital gains tax. There really is no downside to structuring the sale of your property as a 1031 tax exchange – if you can`t identify or acquire qualified replacement real estate, the funds will be returned to you on the fiduciary service. Do you want to sell your property without paying federal and national taxes on capital income? Did you know that you can sell conservation services, development rights, water rights, etc., without paying federal and national taxes on capital income? Since 1921, Section 1031 of the Internal Revenue Code has allowed farmers (and other owners of investment and commercial or business real estate) to defer the profit from the sale of real estate by acquiring replacement property. What is considered investment or business real estate? In general, almost all property except for an apartment occupied by themselves. On this page, we discuss the basics of a 1031 Tax-Deferred Exchange, also known as the 1031 Exchange. Exchange Last Transaction: In a final exchange transaction, the exchanger must acquire the replacement property prior to the transfer of the abandoned property….