What is a Simultaneous 1031 Exchange?

What is a Simultaneous 1031 Exchange?

A simultaneous 1031 exchange, also known as a like-kind exchange, also known as a "drop-and-swap" exchange, is a type of 1031 exchange where the closing on the sale of the relinquished property (the property being sold) and the closing on the purchase of the replacement property (the new property) occur on the same day. This is in contrast to a delayed 1031 exchange, where the taxpayer has up to 180 days to identify and purchase a replacement property. The primary benefit of this type of exchange is the deferral of capital gains taxes that would normally be due upon the sale of a property.

Here are the key aspects of a simultaneous 1031 exchange:

  1. Like-Kind Property: The properties involved in the exchange must be of "like-kind," meaning they are of the same nature or character, even if they differ in grade or quality. In the context of real estate, this typically means that both the relinquished and replacement properties must be used for business or investment purposes.
  2. Simultaneous Transaction: In a simultaneous 1031 exchange, the transactions (both the sale of the relinquished property and the purchase of the replacement property) occur at the same time. This can be logistically challenging, as it requires both transactions to be perfectly coordinated.
  3. Qualified Intermediary (QI): Although a QI is commonly used in delayed exchanges to hold proceeds and facilitate the transaction, in a simultaneous exchange, their role might be less central since the exchange is immediate. However, involving a QI can help ensure the exchange meets all IRS requirements and provides a clear documentation trail.
  4. IRS Regulations: The exchange must adhere to specific IRS rules to qualify for tax deferment. This includes restrictions on the timing of the identification and receipt of the replacement property, even though these are less of a concern in a simultaneous exchange compared to delayed exchanges.
  5. Tax Deferral: The primary advantage of a simultaneous 1031 exchange is the ability to defer capital gains taxes on the sale of a property, as long as the proceeds are reinvested in a like-kind property. This can significantly impact an investor's ability to preserve and grow their capital.


  • Simplicity: There is no need to identify and purchase a replacement property within 45 days, as is required with a delayed exchange.
  • Speed: The entire exchange can be completed in a matter of days.
  • No need for a QI: If you can find a willing party and coordinate the closings yourself, you may not need to use a QI. However, this is generally not recommended, as it is very easy to make a mistake that could disqualify the exchange.


  • Difficult to find a willing party: It can be very difficult to find another investor who is also looking to do a simultaneous exchange and whose property has the same or similar value as yours.
  • Complex to coordinate: Coordinating the closings of two properties on the same day can be a complex and stressful process.
  • Higher risk of disqualification: There is a higher risk of making a mistake that could disqualify the exchange from 1031 treatment, as there is no time for errors.

Simultaneous 1031 exchanges are less common than delayed (or deferred) exchanges because the strict timing can be difficult to achieve. If executed properly, they can help real estate investors to reinvest proceeds from property sales without immediately incurring capital gains taxes.

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