Planning a 1031 Exchange Before You List Your Property: A Pre-Sale Checklist

Three to six months out: put a dollar figure on the tax an exchange would defer

The first checklist item is a tax estimate, because it decides how much effort the exchange deserves and how much boot you can tolerate. Pull the closing statement from your purchase, every depreciation schedule since, and the capital-improvement invoices, then ask your CPA to compute adjusted basis and split the gain into depreciation taken and appreciation.

Hypothetical: an $800,000 sale of a rental bought for $400,000 with $120,000 of depreciation taken has an adjusted basis of $280,000 and a $520,000 gain. Federal tax at the top brackets is $120,000 × 25% on the unrecaptured §1250 gain, $400,000 × 20% on the rest, and 3.8% net investment income tax on all $520,000, roughly $129,800 before state tax.

The 20% rate applies only above $613,700 of 2026 taxable income for joint filers ($545,500 single); below that the appreciation portion is taxed at 15%. Add your state's rate from the state-by-state rules and you have the figure the rest of this checklist is protecting.

Pick the qualified intermediary before the listing agreement, and rule out the people who cannot serve

Choose the QI while you still control the contract wording, because the QI's exchange agreement, the assignment of your sale contract and the written notice to the buyer all have to exist before closing. What a qualified intermediary does is fixed by regulation; who may do it is the pre-sale question.

Anyone who has acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two years before the transfer is a disqualified person and cannot be your QI, and neither can a related party. Your title company or closing attorney may be fine for this deal and disqualified for the next one, so check the two-year window each time.

• Ask how proceeds are held: a qualified escrow or trust account whose agreement expressly limits your rights to receive, pledge or borrow the money before day 180.
• Ask for the written contingency clause the QI uses when an identified property falls through after day 45, since that clause controls whether you wait until day 181 for a refund.
• Ask whether the QI runs reverse and improvement exchanges through its own exchange accommodation titleholder, in case your timing flips.
• Ask how the QI handles a closing after October 17, 2026, when the 180-day period runs past the April 15, 2027 return due date.

What the QI needs to open your file, and the two documents that must exist at closing

A QI can open the file the same day you send the sale contract, so the information request is short. Asset Preservation's intake form, for example, asks for the exchanger's name exactly as it appears on title, mailing address and contact details, the property address and county, the sale price, the estimated mortgage payoff, any seller financing, the buyer's name, the closing agent's contact and file number, the estimated closing date and the listing agent's contact.

From that, the QI prepares an exchange agreement, an assignment of your rights under the sale contract to the QI, and a written notice of the assignment to the buyer. Under Publication 544 the QI is treated as the seller only if those rights are assigned and every party to the contract is notified in writing, which is why the assignment cannot be backdated after funding.

If you already have a replacement under contract, send that contract too: the QI needs the seller's name, price, closing agent and target date to prepare the purchase-side assignment.

Confirm title and vesting now: the taxpayer who sells is the taxpayer who has to buy

Pull the recorded deed and compare it with the tax return that reports the rental income; they must name the same taxpayer, and any mismatch is a months-long fix rather than a closing-week fix. A single-member LLC or a revocable living trust is disregarded, so title in either can exchange into title in your own name, but a multi-member LLC, a partnership or an S corporation is its own taxpayer and must buy the replacement itself; see the same-taxpayer rules.

If co-owners want different outcomes, one cash and one exchange, the restructuring needs to happen well before the contract, because an interest in a partnership is not real property and cannot be exchanged. The drop-and-swap guide explains the timing and the holding-period risk.

Then fix the contract language. IPX1031's sample cooperation clause provides that the seller's rights under the agreement may be assigned to the qualified intermediary for the purpose of completing the exchange, with the buyer agreeing to cooperate; put the equivalent clause in your listing agent's standard form before offers arrive.

Pre-screen the replacement menu before listing so day 45 is a formality

The identification rules give you three properties of any value, or any number whose total value stays within 200% of what you sold, and the list must be signed and delivered by midnight of day 45; the identification answer covers the form of the notice. Pre-screening means arriving at closing with the list already drafted.

Screen each candidate type on the one constraint that kills it late: direct property needs a lender who can close inside 180 days, a single-tenant NNN building needs a price you can reach with the whole proceeds, and a Delaware Statutory Trust needs accredited-investor paperwork and an offering with capacity left. DST interests qualify as like-kind real estate under Rev. Rul. 2004-86, and minimums as low as $50,000 to $100,000 (per Legal 1031) mean one list can carry several.

Our role at this stage is the DST shelf: we show you current offerings from vetted national sponsors, reserve equity where an offering fits, and coordinate with your QI so a DST can sit on the list as a named backup. The traditional DST page and the DST library cover what you would own.

Build the backup plans into the calendar from day one

Every backup below is cheap to arrange before listing and impossible to arrange after the wrong date passes, so put each one on the same calendar as the listing and the target closing. Print the checklist, date each item, and give copies to your CPA, your listing agent and the QI so all three work from the same closing date; confirm each rule with your CPA or attorney before you rely on it, because your entity, state and lender can change the order of steps.

• Replacement found before the sale: a reverse exchange needs an exchange accommodation titleholder to take title and a QEAA signed within five business days, and the 180-day parking clock starts at that acquisition; see the reverse exchange guide.
• Primary deal at risk of failing after day 45: name a DST as the second or third property so the fallback is already identified; the DST backup strategy has the wording for the notice.
• Closing after October 17, 2026: your 180 days run past April 15, 2027, so calendar a Form 4868 (or Form 7004 for an entity) before anyone files a return; the advanced deadline traps guide has the dates.
• Sale that might fall through: keep the exchange agreement in place, because the QI simply never receives funds, no exchange begins and nothing is reported.
• Wire instructions: agree with the QI in writing how instructions will be verified, since the proceeds move once and only to the QI's account; see protecting the exchange from wire fraud.