The Florida 1031 exchange closing guide

Four roles, and it helps to keep them apart:

• The investor sells one property and buys another, and is the taxpayer the exchange is for.
• The tax adviser — a CPA or tax attorney — decides whether an exchange makes sense and whether the properties qualify, and reports it afterward.
• The qualified intermediary is a person who is not the taxpayer or a disqualified person, who signs a written exchange agreement with the taxpayer and, under it, acquires and transfers the property being sold and the property being bought (Treas. Reg. § 1.1031(k)-1(g)(4)(iii)). It holds the proceeds between the two closings.
• The closing agent — here, us — closes both transactions, insures both titles, and moves the money where the exchange documents say it goes.

We do not act as a qualified intermediary. We close both sides of an exchange with whichever intermediary the investor chooses, and nothing about how we close depends on which one it is.

Bayit Exchange Company is a separate company under different ownership, with no connection to Bayit Title. The name is shared and nothing else is, which is worth saying rather than leaving the name to imply otherwise.

That is the tax adviser's question, and the statute is the starting point. No gain or loss is recognized "on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment" (26 U.S.C. § 1031(a)(1)). Since 2018 that means real property only.

Three limits come up on Florida files:

• It does not apply to real property "held primarily for sale" (§ 1031(a)(2)) — the question a fix-and-flip raises.
• Real property in the United States and real property outside it "are not property of a like kind" (§ 1031(h)).
• The rules do not apply to real property used for personal purposes, such as your home (IRS Publication 544).

Because once the investor has the money, there is no exchange left. If the taxpayer "actually or constructively receives money or other property in the full amount of the consideration" before receiving the replacement property, "the transaction will constitute a sale and not a deferred exchange" (Treas. Reg. § 1.1031(k)-1(f)(1)). Money is constructively received when it is credited to the taxpayer's account, set apart for the taxpayer, or otherwise made available to draw on, and receipt by the taxpayer's agent counts as receipt by the taxpayer (§ 1.1031(k)-1(f)(2)).

The qualified intermediary is the safe harbor from that rule: it is not treated as the taxpayer's agent (§ 1.1031(k)-1(g)(4)(i)), but only if the exchange agreement expressly limits the taxpayer's rights to receive, pledge, borrow or otherwise obtain the benefit of the money it holds (§ 1.1031(k)-1(g)(4)(ii), (g)(6)).

For the closing that means one thing: the net proceeds of the sale go from our trust account to the intermediary's exchange account, and never to the seller or the seller's own account. It is why the exchange agreement has to be signed, and the intermediary's wiring instructions verified, before the settlement statement is final.

A disqualified person, which includes the taxpayer's agent. Anyone who has acted as the taxpayer's "employee, attorney, accountant, investment banker or broker, or real estate agent or broker" within the 2 years before the first property is transferred is treated as the taxpayer's agent (Treas. Reg. § 1.1031(k)-1(k)(2)). So the investor's own Realtor, CPA or attorney of the last two years cannot hold the proceeds. A person related to the taxpayer under the rules of sections 267(b) and 707(b) is disqualified too, with 10 percent read in place of 50 percent wherever those sections use it (§ 1.1031(k)-1(k)(3)).

Two kinds of past service do not count against a person: services on earlier section 1031 exchanges, and "routine financial, title insurance, escrow, or trust services for the taxpayer by a financial institution, title insurance company, or escrow company" (§ 1.1031(k)-1(k)(2)(i)–(ii)).

The sale is the relinquished property, and it closes much like any Florida sale, with three differences:

1. The contract is assigned to the intermediary. The intermediary is treated as entering into the sale contract if the taxpayer's rights under it are assigned to the intermediary "and all parties to that agreement are notified in writing of the assignment on or before the date of the relevent [sic] transfer of property" (Treas. Reg. § 1.1031(k)-1(g)(4)(v)). The written notice to every party — the buyer included — is part of the closing package, signed before the closing, not after.
2. The deed can still run straight to the buyer. The intermediary is treated as acquiring and transferring the property if it has entered into the agreement, including by that assignment, and the property is then transferred under it (§ 1.1031(k)-1(g)(4)(iv)(B)). It does not need to take title itself.
3. The proceeds go to the intermediary. The settlement statement shows the net proceeds payable to the intermediary, and that is where they are wired.

In an ordinary exchange, what does not change is the Florida side. Section 1031 is a federal income tax rule, and Florida has no documentary stamp tax exemption for an exchange; the tax on the deed is charged under Fla. Stat. § 201.02 as on any sale — $3,500 on a $500,000 sale outside Miami-Dade — and the owner's title policy for the buyer, the seller's payoffs and the recording are what they would be anyway.

The day the relinquished property is transferred is day 0 for both deadlines.

Both run from the date the relinquished property is transferred:

• Identification. The identification period "ends at midnight on the 45th day thereafter" (Treas. Reg. § 1.1031(k)-1(b)(2)(i)). Replacement property not identified by then is treated as not like-kind (26 U.S.C. § 1031(a)(3)(A)).
• Receipt. The exchange period ends at midnight on the earlier of the 180th day or "the due date (including extensions) for the taxpayer's return" for the year of the sale (§ 1.1031(k)-1(b)(2)(ii); § 1031(a)(3)(B)).

Where more than one property is sold as part of the same exchange on different dates, both periods run from the earliest of them (§ 1.1031(k)-1(b)(2)(iii)).

The return due date is the trap in a sale late in the year. The regulation's own example is a sale on November 16: the 180th day would fall in May, but the exchange period ends on March 15, the due date of that taxpayer's return — unless the taxpayer is allowed the automatic extension, in which case it runs the full 180 days (§ 1.1031(k)-1(b)(3)). That is a conversation for the tax adviser before the sale closes, not after.

Both periods run in calendar days, not business days, and end at midnight on the last day. The regulation says nothing about a last day that falls on a weekend or holiday. A general rule of the tax code moves some deadlines that do to the next business day (26 U.S.C. § 7503), but we know of no IRS guidance applying it to these two periods, so plan as if the date does not move. The one way the IRS does move them is after a federally declared disaster (below).

In writing. Replacement property is identified only if it is "designated as replacement property in a written document signed by the taxpayer" and sent before the end of the identification period either to the person obligated to transfer it to the taxpayer, or to "any other person involved in the exchange other than the taxpayer or a disqualified person" (Treas. Reg. § 1.1031(k)-1(c)(2)). The regulation names an intermediary, an escrow agent and a title company as examples of persons involved in the exchange. Real property is described by its legal description, street address or a distinguishable name (§ 1.1031(k)-1(c)(3)), and an identification can be revoked only in a signed writing sent, before the period ends, to the person it was sent to (§ 1.1031(k)-1(c)(6)).

How many properties may be identified (§ 1.1031(k)-1(c)(4)):

• Three properties, of any value; or
• any number, as long as their combined fair market value at the end of the identification period is no more than 200 percent of the value of the property sold.

Identify more than that and the taxpayer is treated as having identified nothing, unless what is actually received by the end of the exchange period is worth at least 95 percent of everything identified.

The purchase is the replacement property, and it mirrors the sale:

• The purchase contract is assigned to the intermediary, with written notice to the seller, on the same rule as at the sale (§ 1.1031(k)-1(g)(4)(v)).
• The deed runs from the seller directly to the investor. The intermediary is treated as acquiring and transferring the replacement property where it has entered into the purchase agreement and the property is transferred to the taxpayer under it (§ 1.1031(k)-1(g)(4)(iv)(C)).
• The intermediary funds the purchase by wire to our trust account, and the settlement statement shows the exchange funds as the intermediary's.
• The vesting is settled early. Who takes title — the investor, an LLC, a trust — is the tax adviser's question as much as the lawyer's, because the exchange has to finish with the right taxpayer. We need the answer before Schedule A of the commitment names the proposed insured, not at the signing.

Everything else is an ordinary Florida purchase: the owner's policy, and the lender's if there is a loan, the mortgage stamps and intangible tax, and recording. Florida title insurance: the complete 2026 guide covers each of those.

Where the replacement has to be bought before the old property sells, the IRS safe harbor is a qualified exchange accommodation arrangement: a titleholder who is not the taxpayer or a disqualified person holds title in the meantime (Rev. Proc. 2000-37, § 4.02). Its deadlines are its own:

• a written agreement with the titleholder no later than five business days after it takes title;
• the property to be sold identified within 45 days;
• the properties transferred out within 180 days, with no more than 180 days in the arrangement combined.

The safe harbor does not apply to replacement property the taxpayer owned within the 180 days before the titleholder took title to it (Rev. Proc. 2004-51). At the closing, it is the titleholder that takes title, so the deed, the commitment and the policy name it rather than the investor. Tell us at the start if an exchange is going to run in reverse.

A reverse exchange adds a deed: the seller's deed to the titleholder, which is taxed as any sale, and later the titleholder's deed to the investor. A deed from an agent to its principal for property bought with the principal's funds is not taxed (Fla. Admin. Code R. 12B-4.014(5)). The Department of Revenue has advised individual taxpayers that the titleholder's deed was not taxed again where the exchange agreement made the titleholder the investor's agent for that purpose, and that without such a statement it would not treat the titleholder as an agent (TAA 05B4-006). An advisement binds the Department only for the taxpayer who asked, so how the agreement is worded is a question for the intermediary and the investor's tax adviser before the titleholder takes title. The second deed is also recorded, and an owner's policy for the investor on it is a second premium.

The deadlines can be postponed, but only when the IRS says so. When it announces relief for a federally declared disaster, a 45-day or 180-day deadline falling on or after the date of the disaster is postponed by 120 days, or to the end of the general extension period the IRS announces if that is later — never beyond the due date of the return, with extensions, and never by more than a year (Rev. Proc. 2018-58, § 17.02).

It applies only where the property sold was transferred on or before the disaster, and the taxpayer is an affected taxpayer under the IRS announcement or has difficulty meeting the deadline because of the disaster, for reasons that include:

• the relinquished or replacement property is in the covered disaster area;
• the principal place of business of a party — an intermediary, a lender, a title insurance company — is there;
• the deed, the exchange agreement or a relevant land record was destroyed, damaged or lost;
• a lender will not fund, or a title insurance company cannot issue the policy, because of the disaster.

The IRS lists current relief on its tax relief in disaster situations page. Whether an exchange qualifies is the tax adviser's call; what we can do is tell them promptly if the closing itself is held up.

The exchange is reported on Form 8824. "If during the current tax year you transferred property to another party in a like-kind exchange, you must file Form 8824 with your tax return for that year," and for the 2 years after a related-party exchange as well (Instructions for Form 8824). The closing statements from both closings are what the tax adviser works from, which is one more reason they have to say exactly where every dollar went.

An exchange with a related person carries its own rule: if either side disposes of the exchanged property within 2 years after the last transfer, the nonrecognition is lost (26 U.S.C. § 1031(f)). That is for the tax adviser to raise at the start.

To close an exchange without a scramble:

• From the investor: that it is an exchange, as soon as the property is listed or under contract, and the name of the intermediary.
• From the intermediary: the exchange agreement, the assignment of the sale contract and the notice to the buyer, the same for the purchase contract, and its wiring instructions — which we verify with it by phone, on a number we find ourselves, before any money moves.
• From the CPA or tax counsel: how title to the replacement should vest, and anything about the timing we should know, such as a return extension.
• From the attorney, where there is one: the entity documents for whoever takes title, and any structure beyond a straightforward deferred exchange.

The decision to exchange is always the tax adviser's, as are whether the properties qualify, how the replacement should vest, any cash the investor wants to take out, and anything involving a related person. A real estate attorney belongs on a reverse exchange, an entity or trust structure, or anything contested. We close alongside all of them and build the statements to their instructions.