By Ben Jimenez
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Mesquite, TX
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November 2, 2026
A 1031 exchange lets you sell an investment property and put the proceeds into another investment property while deferring the capital gains tax. You don't avoid the tax, you push it down the road. To pull it off, a qualified intermediary holds your sale money, you identify replacement property in writing within 45 days, and you close on it within 180 days. Miss a deadline or touch the cash and the exchange fails.
Both clocks start the day you transfer the property you are selling. They run at the same time, not back to back.
That second part catches people. If you sell late in the year and your return is due before day 180, you may need to file an extension to get the full window.
Treasury regulations give you two main options:
If you go over both limits, the identification only holds if you actually acquire at least 95% of the value of everything you identified. In practice, most investors stick to three.
Less than people fear. The IRS says properties are like-kind if they are of the same nature or character, even if they differ in grade or quality. For real estate, that is broad. A rental house in Mesquite can be exchanged for a fourplex in Garland, a retail building in Tyler, or raw land held for investment.
The limits are where the trouble is:
Boot is anything you receive that isn't like-kind property, usually cash. The IRS says you recognize gain to the extent of the money and other property you receive. Taking cash out at closing, or buying a cheaper replacement, creates taxable boot. Ending up with less debt on the new property can also count, which is a good question for your CPA.
If the sale money is credited to your account or made available to you, that is treated as receiving it. A qualified intermediary is an unrelated party who holds the funds under a written agreement and handles the transfers. Per the IRS, related parties and your own agents, like your regular attorney or accountant, aren't eligible to serve as your QI. Line up the QI before you close the sale, not after.
If you exchange with a related party and either of you disposes of the property within 2 years after the last transfer, the deferred gain can become taxable, with limited exceptions.
Some context first. As of October 2026, Resideline tracked 709 Mesquite closings over six months with a median price of $279,999 and a median of $162 per square foot. Apartment List puts the city's median rent at $1,241, down 3.4% from a year earlier, and RentCafe counts about 37% of Mesquite households as renter-occupied. Softer rents are one reason some owners are rethinking what they hold.
Now a hypothetical. Say you sell a Mesquite rental for $300,000 and the sale money goes straight to a qualified intermediary.
Now change one thing. Say you buy a $280,000 replacement and the QI sends you the leftover $20,000. That $20,000 is boot, and it is taxable up to the amount of your gain. The rest stays deferred.
This is general information, not tax advice. Before you list, talk to a CPA or tax advisor and line up a qualified intermediary. Every exchange is reported on IRS Form 8824.
If you are thinking about selling a rental in Mesquite and want to know what it would sell for and what is out there to exchange into, call or text Ben Jimenez at 469-730-6895. He can help you plan the sale and the search so the 45-day clock doesn't run you over.
Not directly. The replacement has to be held for business or investment, and your personal residence isn't. If your plans might change later, talk to a CPA before you close, because the rules on converting an exchange property are strict.
No. Any U.S. real property held for investment or business use can qualify, so you can sell in Mesquite and buy in another state. Foreign property is the line, since U.S. and foreign real property aren't like-kind.
Generally no. If the money hits your account or is made available to you, you are treated as having received it. Set up the qualified intermediary agreement before closing so the funds go straight to the QI.
You report it on IRS Form 8824, Like-Kind Exchanges, with your return for the year you sold. Your CPA will need the dates, sale and purchase figures, and any boot you received.
No, it defers the gain. Your basis in the old property carries into the new one, so the deferred gain is still there when you eventually sell without exchanging. A tax advisor can walk through how that plays out in your situation.
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