--- name: 1031_exchange_planning description: Plan a US Section 1031 like-kind exchange in plain language, with a deadline calculator for the 45 day identification and 180 day exchange periods, a replacement screening worksheet that checks the identification rules and estimates cash and mortgage boot with the one-way netting rule, and a worked timeline. Use when someone is selling or has sold investment or business real property and wants to defer gain into replacement real property, asks about 1031 deadlines, a qualified intermediary, like-kind rules, or whether a replacement property is big enough to defer the full gain. --- # 1031 Exchange Planning ## Purpose A Section 1031 exchange defers gain when investment or business real property is exchanged for like-kind real property. The deferral is won or lost on mechanics: a qualified intermediary engaged before the sale closes, a signed identification delivered by day 45, and title to the replacement received by day 180 or the tax return due date, whichever comes first. This skill turns those rules into a dated plan, screens replacement properties before the identification list locks, and produces the question list a CPA and a real estate attorney need to rule on the facts. This is planning and education. It is not tax or legal advice, and it never tells the user an exchange qualifies. Only the user's own CPA or tax attorney can rule on their facts. ## Workflow 1. **Place the exchange in time.** Ask whether the relinquished property has closed yet. If it has not, the first task is engaging a qualified intermediary before closing. If it has, get the exact transfer date (the closing date on the settlement statement) and start from there. A sale that already closed without an intermediary in place is not a deferred exchange, and the plan becomes a conversation with the CPA about what the sale is, stated plainly. 2. **Run the deadline calculator.** `python3 bin/exchange_calc.py deadlines --close-date YYYY-MM-DD` with the transfer date. Add `--return-due-date YYYY-MM-DD` whenever the sale falls in the second half of the year, and `--related-party` when any party is a related person. Read the output back to the user as calendar dates with weekdays. Flag two things out loud: a deadline that lands on a weekend or holiday (it does not move, so the working date is the prior business day) and a return due date that ends the exchange period before day 180 (the fix is an extension for the year of sale, planned now, owned by the CPA). 3. **Check the qualifying basics.** Both properties are real property held for business or investment use, in the United States, and the same taxpayer sells and buys. Personal residences, vacation homes used personally, dealer inventory, and property bought to flip do not qualify. Since 2018 the exchange covers real property only. Full rule table with authorities: `references/rules-and-authorities.md`. 4. **Vet the intermediary.** The QI cannot be the taxpayer, the taxpayer's agent, a related person, or someone who worked for the taxpayer in the prior 2 years as employee, attorney, accountant, investment banker or broker, or real estate agent or broker, subject to the narrow exceptions in Reg. 1.1031(k)-1(k). The exchange agreement must limit the taxpayer's access to the held funds in the words of Reg. 1.1031(k)-1(g)(6). The taxpayer never touches the proceeds. Questions to put to the QI in writing: `references/advisor-questions.md`. 5. **Build the identification list before day 45.** Each property gets an unambiguous description (legal description, street address, or distinguishable name) in a signed writing delivered to the QI. Test the list against all three identification rules: up to 3 properties of any value, or any number up to 200 percent of the relinquished value, or the 95 percent exception that requires actually acquiring 95 percent of everything identified. The worksheet in step 6 runs this check. Remind the user the list can be changed until midnight on day 45 and never after, and that backups are the whole point of identifying more than one. 6. **Screen replacements with the worksheet.** Copy `assets/sample-deal.json`, replace it with the real figures (sale price, debt relieved, adjusted basis, exchange expenses paid from proceeds, each identified property with FMV, price, and planned debt, and which of them will actually be acquired), then run `python3 bin/exchange_calc.py screen deal.json`. Read the three diagnostics separately: value shortfall, leftover QI equity, and net debt relief. Then read the boot estimate, which applies the netting rule of Reg. 1.1031(d)-2: cash paid in offsets mortgage boot, extra debt assumed does not offset cash boot. The calculator reproduces the IRS worked example in the Form 8824 instructions to the dollar (see `references/rules-and-authorities.md`, Boot section). 7. **Walk the worked timeline.** `references/worked-timeline.md` shows a complete run for a sale that closed on September 15, 2026, including the December variant where the return due date cuts the exchange period short. Adapt it to the user's dates instead of handing over a generic checklist. 8. **Close the loop on advice and filing.** Hand the user the advisor question list with the plan, not after it. The plan ends with Form 8824 filed with the return for the year of the transfer, both closing statements and the signed identification kept with the tax file, and, for a related party exchange, Form 8824 filed for the 2 following years as well and no disposition by either side for 2 years under IRC 1031(f). ## Output Contract Every plan this skill produces contains: - **Deadline block**: day 0 transfer date, day 45 identification date, day 180 date, the effective exchange deadline after the return due date test, each with its weekday, plus the practical working date when a deadline lands on a weekend or holiday. - **Status line**: whether the intermediary was engaged before closing, and a plain statement when that did not happen and what it means. - **Identification check**: the list as drafted, which of the three identification rules it passes, and the total FMV against the 200 percent cap where that rule is the one relied on. - **Screening worksheet**: for the acquired set, total price, total new debt, QI cash used, outside cash to bring, cash boot, mortgage boot, total boot, and, when basis was supplied, realized gain, recognized gain, deferred gain, and the replacement basis estimate. - **Advisor list**: the questions from `references/advisor-questions.md` that apply to these facts, with the state tax question and the related party question included whenever either is in play. - **Disclaimer**: one line stating this is educational planning, not tax or legal advice, and that the CPA rebuilds the boot and basis numbers from both settlement statements on Form 8824. ## Operating Rules 1. Never state a deadline without running the calculator on the actual transfer date. Never count business days. Both periods are calendar days, they run at the same time, and weekends and holidays do not extend them. 2. Never present 45 plus 180 as 225 days. The identification period sits inside the exchange period. 3. Never invent a minimum holding period. Section 1031 sets none for an ordinary exchange. The only fixed holding rule is the 2 year related party rule in IRC 1031(f). Holding intent is an advisor question. 4. Never net cash boot against extra debt. Cash boot and mortgage boot are computed the way Reg. 1.1031(d)-2 computes them: cash in can cure debt relief, debt assumed cannot cure cash received. 5. Never add the value, equity, and debt shortfalls together and call the sum boot. They overlap. Boot comes from the worksheet calculation only. 6. Never promise an extension. The only postponement is the federally declared disaster relief in Rev. Proc. 2018-58 section 17, for affected taxpayers named in IRS guidance for that disaster. 7. Never advise the user to receive, hold, borrow against, or direct the sale proceeds personally at any point before the exchange period ends. Constructive receipt ends the deferral. 8. Treat reverse exchanges and improvement exchanges as referrals, not plans. Name the Rev. Proc. 2000-37 safe harbor, the 5 business day written agreement, and the same 45 and 180 day clocks, then send the user to the attorney and QI to structure it. 9. If a number cannot be verified against the closing statement, the basis records, or a source in `references/rules-and-authorities.md`, leave it out or label it an estimate with its inputs shown. No confident unverified claims about rates, fees, or state rules. 10. End every plan with the disclaimer in the Output Contract. No exceptions, even when the user says they understand the rules already.