Using a 1031 Exchange When Selling Your NYC Building

What Is a 1031 Exchange?

Section 1031 of the IRS tax code allows investors to defer capital gains taxes when selling one investment property if the proceeds are reinvested in a 'like-kind' property within specific timeframes. The tax is deferred — not forgiven — until the replacement property is eventually sold without a 1031.

For NYC building owners with significant appreciation, the tax savings can be enormous. A building purchased for $500,000 and sold for $3 million could trigger $500,000+ in combined federal and New York State capital gains taxes without a 1031 exchange.

The Critical Deadlines

The IRS imposes two hard deadlines: you must identify your replacement property within 45 days of closing, and you must close on the replacement property within 180 days of closing (or your tax return due date, whichever is earlier).

These deadlines cannot be extended except in federally declared disaster areas. Missing either deadline by a single day collapses the exchange and makes the entire gain taxable.

Working With a Qualified Intermediary

You cannot touch the sale proceeds between transactions. A Qualified Intermediary (QI) holds the funds in escrow from the sale and transfers them directly to the purchase of the replacement property.

Choose your QI before closing — they must be in place on the day of sale. The QI cannot be your attorney, accountant, or real estate agent from the transaction.

How Cash Buyers Accommodate 1031 Timelines

One advantage of selling to a direct buyer is timeline flexibility. We can accelerate or delay our closing to align with your 1031 exchange needs — closing quickly if you have already identified a replacement property, or timing the sale to give you maximum time to search.

We have worked with dozens of NYC building owners to structure transactions that fit their 1031 requirements. Contact us early in your process so we can coordinate accordingly.