1031 Exchange · ExchangeDIRECT
1031 Exchange Analysis: Should You Exchange or Sell?
Most 1031 tools assume you have already decided. This one does not — it models the taxable sale, the full exchange, and a partial exchange side by side, including the suspended passive losses and debt mechanics that often change the answer.
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Run your own analysis
A short interview about the property, your basis, and your goals — then side-by-side estimates for selling, exchanging fully, and exchanging partially, with the assumptions driving each result.
What a 1031 exchange actually defers
A like-kind exchange defers the gain — it does not erase it. The deferred gain reduces the tax basis of the replacement property and stays embedded in that property until a later taxable disposition. Deferral is not the same thing as savings: the right comparison is what you keep after tax under each path, not how much tax you avoided this year.
Suspended passive losses can flip the answer
A fully taxable disposition of your entire interest can release suspended passive losses, which may substantially reduce the tax on a sale. When that release is large relative to the tax, paying the tax deserves serious consideration — and most exchange calculators ignore this entirely.
Boot has sources, not just a total
Cash retained and net debt relief are different problems with different fixes. We show them separately by source rather than collapsing them into one unexplained number, and we never auto-net sale-side against purchase-side closing items.
Debt does not have to be replaced dollar for dollar
Reduced replacement debt can be offset by additional cash. What matters is meeting the equal-or-greater value test and reinvesting the exchange proceeds — so we model a real closing, where escrow pays off your loan, rather than a buyer assuming it.
Frequently asked questions
Does a 1031 exchange eliminate the tax?
No. A 1031 exchange defers the gain, it does not erase it. The deferred gain reduces the tax basis of the replacement property and remains embedded in that property until a later taxable disposition.
Can suspended passive losses make selling better than exchanging?
Sometimes. A fully taxable disposition of an entire interest can release suspended passive losses, which may materially reduce the tax on a sale. When that release is large relative to the tax, paying the tax can deserve serious consideration alongside exchanging.
Do I have to replace my mortgage dollar for dollar?
Not necessarily. Reduced replacement debt can be offset by additional outside cash. What matters is meeting the equal-or-greater value requirement and reinvesting the exchange proceeds; debt reduction not offset by cash generally creates debt-relief boot.
What is boot in a 1031 exchange?
Boot is value received that is not like-kind property. It commonly arises as cash retained from the sale or as net debt relief. Cash boot and debt-relief boot should be evaluated separately by source rather than netted into a single number.
What are the 45-day and 180-day deadlines?
Replacement property must generally be identified within 45 days of closing the relinquished property, and the exchange completed by the earlier of 180 days or the tax return due date for the year of sale, including extensions where applicable.
An estimate is a starting point, not a filing position.
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