Recent Tax Court and IRS Rulings on 1031 Exchanges, Explained (2026 Edition)

This edition covers January 1, 2025 through September 30, 2026. We searched the Tax Court’s opinion database for “like-kind”, “section 1031”, “deferred exchange”, “qualified intermediary” and “identification period”, and the IRS written-determination index under section 1031. The yield is small: one Tax Court opinion where section 1031 was the issue, one reviewed opinion where reported exchange gain decided a limitations fight, one private letter ruling on a build-to-suit exchange, and a new disaster-deadline statute. Here is what each says and why it matters to you.

Brown v. Commissioner: the “spirit of the law” does not save a buy-then-sell

Brown v. Commissioner, T.C. Memo. 2025-17 was filed February 18, 2025. The facts are common. The taxpayers operated an early childhood education facility. They bought a replacement facility on January 25, 2017 and sold the old one on May 30, 2017. The opinion says the two transactions were intended to, “although they did not technically,” comply with the like-kind exchange rules. The taxpayers reported the gain and a 2017 tax liability of $605,597.

They then argued, first in a collection hearing and then through an offer in compromise of $75,000, that the two transactions were “in accordance with the spirit of the law” of section 1031 and that collecting the full tax would be inequitable. The IRS rejected the offer. The offer unit found their ability to pay exceeded $5 million, and the specialist who reviewed it noted that the IRS does not compromise because a taxpayer believes a provision is unfair. That reviewer attached the IRS fact sheet on like-kind exchanges, which makes clear that separate sales and purchases are taxable. The Tax Court found no abuse of discretion and sustained the lien.

The lesson is mechanical. Section 1031 does not grade intent. If you buy first, the replacement has to be held by an exchange accommodation titleholder under Rev. Proc. 2000-37 before the old property sells, which is a reverse exchange. If you already closed on the new property in your own name, read can I 1031 into property I already bought before you list the old one.

JM Assets v. Commissioner: what you report on the return can close the audit window

JM Assets, LP v. Commissioner, 165 T.C. No. 1, a reviewed opinion filed July 2, 2025, is not about whether an exchange qualified. It is about time. A Texas partnership disposed of real property in 2018 and reported, on Form 4797, $403,672 of section 1231 gain from installment sales and $732,566 from like-kind exchanges, with Forms 6252 listing each property sold and its price. The IRS later proposed a $5,499,437 increase in section 1231 gain.

The Court held that a Treasury regulation stretching the partnership adjustment period was invalid to the extent it held the period open longer than section 6235(a)(2) allows. It also held that the six-year period for a substantial omission of income did not apply, because the partnership had adequately disclosed the nature and amount of the income on its return. The final adjustment was untimely.

For an exchanger the takeaway is plain: a complete, accurate Form 8824 and Form 4797 are not only compliance. Clear disclosure of what you sold and for how much can limit how long the IRS has to revisit it.

PLR 202520001: a build-to-suit exchange on land leased from a related partnership

PLR 202520001, released May 16, 2025, answers a question that comes up whenever an investor wants to exchange into something not yet built. The taxpayer, a partnership whose general partner is a REIT, contributed land to a second partnership that it owned with a taxable REIT subsidiary. That partnership would ground lease the land for more than 30 years to a subsidiary of an exchange accommodation titleholder, which would build improvements. The taxpayer would sell properties through a qualified intermediary, identify the leasehold and improvements within 45 days, and receive them within 180 days.

The IRS ruled that the intermediary and titleholder safe harbors were met, so neither was the taxpayer’s agent, and that the taxpayer recognises no gain except boot. A leasehold of 30 years or more is like kind to a fee interest under Reg. section 1.1031(a)-1(c). The related-party rule in section 1031(f)(4) did not bite because no related party would cash out within two years. Rev. Proc. 2004-51 did not block the deal because the taxpayer had not owned the replacement property in the 180 days before the titleholder took it. Two warnings came with the ruling: improvements not finished in time, and proceeds not spent on improvements or other identified property, come back as taxable boot.

A private letter ruling binds the IRS only for the taxpayer who asked; section 6110(k)(3) says it may not be cited as precedent. It still shows how the IRS reads these structures. Our improvement exchange guide covers the simpler versions.

Two later rulings indexed under section 1031, PLR 202625002 and PLR 202625003 (released June 18, 2026), concern a life insurance contract with an annuity rider and section 1035 exchanges. They say nothing about real estate.

New law: disaster postponements now count as extensions

The Disaster Related Extension of Deadlines Act, Public Law 119-64, signed December 26, 2025, added section 7508A(f). Any period disregarded because of a declared disaster is now treated as an extension of the return due date for the refund look-back in section 6511, and the postponed date counts when the IRS times collection notices. It does not change the exchange rules, but it matters to an exchanger who files late under disaster relief and later claims a refund.

The exchange deadlines themselves still move only through Rev. Proc. 2018-58, section 17, as applied by each IRS release. The 2026 releases in force are listed in our September 2026 disaster relief post. Pending legislative proposals are tracked in our 1031 repeal proposals tracker.

What to do now

1. If you plan to buy before you sell, set up the parking arrangement before the purchase closes. Brown shows there is no fixing it afterward.
2. When you file Form 8824 and Form 4797, describe each property and price in full; JM Assets shows that disclosure has value.
3. If you want to exchange into property under construction, have counsel compare your structure with PLR 202520001, and keep a fallback identified in case construction runs late.
4. If your timeline is tight, request a proposal so a replacement that can close quickly, such as a traditional DST, is in view before day 45.

Sources

• Brown v. Commissioner, T.C. Memo. 2025-17 (February 18, 2025), Tax Court docket 160-24L
• JM Assets, LP v. Commissioner, 165 T.C. No. 1 (July 2, 2025)
• PLR 202520001 (released May 16, 2025)
• PLR 202625002 (released June 18, 2026)
• Public Law 119-64, Disaster Related Extension of Deadlines Act
• Rev. Proc. 2018-58
• IRS written determinations search