The 1031 Exchange Checklist (Pre-Closing Through Tax Filing)

60+ days before closing (the prep phase)

• Decide you want to do a 1031. Talk to your CPA first — confirm the property qualifies (held for investment or business use, not personal residence).
• Pick a Qualified Intermediary. The QI must be in place before you close on the relinquished property. If you close first and then hire a QI, the exchange is invalid. Non-negotiable.
• Sign the QI's exchange agreement. This transfers your sale proceeds to the QI's account at closing rather than to you. The whole structure depends on this document.
• Notify your attorney and title company. They need to know a 1031 is in play so closing documents reflect the QI as the assignee.
• Start sourcing replacement properties. Don't wait until after closing. You'll have 45 days to identify — ideally, you want replacements under contract (or at least 2-3 strong candidates) by the time your relinquished property closes.

Closing day — the relinquished property

• QI's assignment language appears in the closing documents. The QI is assigned your rights as seller. This is what makes the exchange valid.
• Proceeds go directly to the QI's account. Not to you, not to your attorney, not to an escrow account you can access. Any direct receipt voids the exchange.
• Keep the settlement statement. You'll need it for Form 8824 a year from now.
• Mark Day 0 in your calendar. Day 0 is the closing date. Day 45 (identification deadline) and Day 180 (replacement closing deadline) are counted from here — calendar days, including weekends and holidays, no exceptions.

Days 1-45 — the identification window

This is where most exchanges fail. See the 45-day rule for full details. The checklist:

• Tour and diligence candidate replacements. Ideally you already did this pre-closing.
• Pick your identification rule. 3-property rule (most common), 200% rule, or 95% rule.
• Draft the identification letter. Property address, legal description, or tax parcel ID — unambiguous identifiers only. Your QI usually provides a template.
• Sign and date the letter. Unsigned identifications don't count.
• Deliver it to the QI by Day 45. Overnight courier or email with delivery confirmation. Not first-class mail. Not to your attorney.
• Keep proof of delivery. This is your audit insurance.

Days 46-180 — the acquisition window

• Negotiate and sign purchase contracts on identified property. You can only close on property that made the identification list.
• Due diligence, inspections, title, appraisal. Run all of it tight. The Day 180 clock is hard.
• QI delivers the exchange funds at closing. Not to you — directly to the seller or escrow. You never touch the money.
• Bring fresh cash if needed to avoid boot. See the boot article — if your replacement purchase is less than your relinquished sale, you'll owe tax on the difference unless you structure carefully.
• Close by Day 180. Not 181. No extensions outside federally-declared disasters.

After closing — through tax filing

• Collect all closing documents. Settlement statements from both sides, the QI's accounting of the exchange, the identification letter, the exchange agreement. Your CPA will need the full file.
• Give your CPA a 1031 heads-up well before tax time. Not every CPA has done dozens of these. If yours hasn't, consider consulting one who has.
• File IRS Form 8824 with your return. This reports the exchange, calculates the carry-over basis in your replacement property, and tracks deferred gain and deferred depreciation recapture.
• Keep the exchange file forever. When you eventually sell the replacement property (or 1031 again), you'll need this file to calculate basis accurately. Don't throw it out.

Common mistakes this checklist prevents

The 1031 failures I see trace back to three patterns:

1. Starting the QI paperwork too late. The assignment must be in place before closing. I've watched $400k of deferrable gain evaporate because the seller's attorney forgot to loop in the QI.
2. Treating the 45-day deadline as a soft target. It's not. Day 45 is Day 45. Build the calendar, set reminders, deliver early.
3. Ignoring boot. Investors focus on completing the exchange and forget that if their replacement is cheaper, they owe tax on the cash left over. Run the math before committing.