1031 Exchange Advisory for Florida Commercial Property

Last updated: August 2026

A 1031 exchange is a provision of federal tax law — Internal Revenue Code §1031 — that lets an owner defer federal income tax on the gain from selling real property held for productive use in a trade or business or for investment, by exchanging it for like-kind real property instead of selling it outright. Ironmark Capital Advisory is a Florida commercial real estate brokerage that works both ends of that exchange: pricing and selling the relinquished building, and sourcing and underwriting the replacement property. The tax, legal and fund-custody roles belong to your CPA, your attorney and your qualified intermediary; Ironmark gives no tax or legal advice and never acts as a qualified intermediary.

Does the building my own business occupies qualify for a 1031 exchange?

Yes. IRC §1031(a)(1) applies to real property held for productive use in a trade or business or for investment, and a warehouse, shop or flex building occupied by the owner’s own operating company is held for productive use in a trade or business — as is a building held in a separate entity that leases it to that company. The exclusion in §1031(a)(2) reaches only real property held primarily for sale, meaning dealer inventory. Florida owner-users routinely assume section 1031 is a landlord’s tool and never raise it with a CPA until a contract is signed, by which point several of the choices below have closed. Two limits apply to everyone. Section 13303 of Public Law 115-97, the Tax Cuts and Jobs Act, restricted §1031 to real property for exchanges completed after December 31, 2017, with a transition rule where the relinquished property was transferred or the replacement property received on or before that date — so equipment, rolling stock, inventory and goodwill sit outside the exchange, and whether a given machine is real property is decided asset by asset under Treas. Reg. §1.1031(a)-3, by the CPA rather than the broker. Within real property, like kind is broad: the words refer to the nature or character of the property, not its grade or quality (Treas. Reg. §1.1031(a)-1(b)). Two hard edges — United States and non-U.S. real property are not of a like kind (IRC §1031(h)), and an interest in a partnership is never real property (Treas. Reg. §1.1031(a)-3(a)(5)(iii)).

What are you actually deciding when you sell the building your business occupies?

Three things at once: what happens to your company’s occupancy, what the buyer is therefore buying, and how much of the price can enter the exchange at all. An owner-user sale is not a landlord’s disposition — the seller is also the tenant, so occupancy is a negotiated term of the deal rather than an afterthought.

The allocation in the third row decides how much of the price is even eligible. Where real estate and operating-business assets go to one buyer in one transaction, that is an applicable asset acquisition (IRC §1060(c)), the consideration must be allocated under the residual method of §338(b)(5) (IRC §1060(a)), and both parties must report it on Form 8594 (IRC §1060(b)). Only the real-property share can go into the exchange, so an agreement that states one blended number and leaves allocation to the accountants afterward is a fight a seller can lose twice — both Forms 8594 are filed, and inconsistency is visible. Ironmark negotiates the business terms of a leaseback knowing they drive both the buyer’s cap rate and the question counsel will review.

Where does the equity go after the sale?

For most Florida owner-users heading toward retirement, into net-leased real estate, because a net lease produces income without producing management. Retail single-tenant net lease averaged a 6.60% cap rate in the second quarter of 2026, and investment-grade tenants on long leases are now under 10% of retail net-lease supply (Ironmark Florida Net-Lease Brief, 2Q 2026) — scarcity that is exactly why sourcing has to begin while the relinquished building is still under contract, not on day one of the 45. Ironmark’s work in that asset class is set out at net-lease investment.

A Delaware statutory trust is the other route to genuinely passive income, and its authority is one ruling. Rev. Rul. 2004-86 holds that a taxpayer may exchange real property for an interest in the Delaware statutory trust described in that ruling without recognition of gain or loss under §1031, if the other requirements of §1031 are satisfied. “Described in that ruling” carries the holding: that trust owns one net-leased property subject to a fixed-rate nonrecourse loan and has almost no discretion. The same ruling states that if the trustee can sell and reinvest, renegotiate the lease or the debt, or make more than minor non-structural modifications not required by law, the trust is classified as a partnership — and a partnership interest is not real property, so the exchange fails. That rigidity is the trade for passivity, and it is why such a trust cannot re-lease a building whose tenant leaves. Depreciation on replacement property does not restart automatically either, so the accelerated-depreciation question applies to new basis rather than the whole price; Ironmark covers that at cost segregation.

How do the 45-day and 180-day deadlines actually work?

Both clocks start on the same day, and that day is the closing of the relinquished property. The identification period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the 45th day thereafter; the exchange period begins on the same date and ends at midnight on the earlier of the 180th day or the due date, including extensions, of the taxpayer’s return for the year of transfer (Treas. Reg. §1.1031(k)-1(b)(2)(i)–(ii)). The 45 days are the first 45 of the same 180, not a separate window in front of it; days 46 through 180 exist only to close on something already identified. The return-due-date clause is the trap that catches fourth-quarter sellers, and the regulation works the arithmetic itself: at Treas. Reg. §1.1031(k)-1(b)(3), a corporation transfers property on November 16, 1992, identification ends December 31, 1992, and the exchange period ends March 15, 1993 — the return due date — not day 180; with the automatic six-month extension the same example ends it on May 15, 1993. A closing in the last 45 days of a tax year silently shortens the exchange period unless that extension is filed, and filing it is your CPA’s step, planned before the closing rather than discovered in March. These are midnight deadlines with no weekend, holiday, or good-cause extension in the regulation; the only published postponement authority is federally declared disaster relief, below.

What makes an identification of replacement property valid?

An identification counts only if it is made in a written document signed by the taxpayer and delivered before the end of the 45-day period to a permitted recipient: the person obligated to transfer the replacement property, or any other person involved in the exchange other than the taxpayer or a disqualified person — the regulation’s examples include an intermediary, an escrow agent and a title company (Treas. Reg. §1.1031(k)-1(c)(2)). In practice it goes to the qualified intermediary; sending it to your own attorney or CPA does not satisfy the rule, because those people are disqualified persons (k)(2).

The penalty for over-identifying is total, not partial: a taxpayer who identifies more than permitted is treated as if no replacement property had been identified (c)(4)(ii). The extras are not simply dropped, and the 95-percent rule is a rescue rather than a plan. Three mechanics finish the picture: real property is unambiguously described by a legal description, street address, or distinguishable name (c)(3); an identification is revoked only by a signed writing delivered the same way, to the same person, before the period ends (c)(6); and what is received must be substantially the same property as identified (d)(1).

Why can’t I touch the money, and what does a qualified intermediary do?

Because receipt of the proceeds converts the exchange into a sale. A taxpayer who actually or constructively receives money or other property in the full amount of the consideration for the relinquished property before receiving like-kind replacement property has made a sale and not a deferred exchange, even though the taxpayer may ultimately receive like-kind replacement property (Treas. Reg. §1.1031(k)-1(f)(1)). Constructive receipt is the point at which the money is credited to the taxpayer’s account, set apart, or otherwise made available so the taxpayer may draw on it, and receipt by an agent of the taxpayer is receipt by the taxpayer (f)(2) — so proceeds wired to the seller’s own lawyer are received by the seller, and the seller need not spend the money to have received it.

No statute requires a qualified intermediary; the statute requires an exchange, and the regulation punishes receipt. Of the four safe harbors in Treas. Reg. §1.1031(k)-1(g), the qualified intermediary safe harbor at (g)(4) is the only practical one in a deferred exchange with an ordinary cash buyer. A qualified intermediary is a person who is not the taxpayer or a disqualified person and who, under a written exchange agreement, acquires the relinquished property from the taxpayer, transfers it, acquires the replacement property, and transfers it to the taxpayer (g)(4)(iii). The mechanic that makes it work is assignment: the intermediary is treated as party to a contract if the rights of a party are assigned to it and all parties are notified in writing on or before the date of the relevant transfer (g)(4)(v) — which is why an exchange cannot be built after a closing has happened. Nothing in federal law licenses, bonds or insures a qualified intermediary or sets custody standards for one; the regulation requires only that it not be a disqualified person and that the agreement expressly limit the taxpayer’s right to the money it holds (g)(4)(ii), (g)(6). Rev. Proc. 2010-14, referenced in the 2025 Instructions for Form 8824, lets a taxpayer whose exchange failed solely because of the intermediary’s bankruptcy or receivership report gain as payments are received — a way to report a loss already suffered, not to recover funds, which is why who holds the money, in what account, under what bond is worth asking.

Who does what: your attorney, your qualified intermediary, your CPA, and Ironmark

A compliant exchange structurally requires four separate parties. Anyone who acted as the taxpayer’s employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two-year period ending on the date the first relinquished property transfers is treated as the taxpayer’s agent, and a disqualified person cannot be the qualified intermediary (Treas. Reg. §1.1031(k)-1(k)(2)). Your attorney cannot be it. Your CPA cannot be it. Ironmark cannot be it. That is a fact about the regulation, not a positioning statement.

The largest practical contribution a broker makes happens before day one of the 45. Where candidates have been sourced and underwritten while the relinquished building is still under contract, the identification window is spent confirming a decision; where they have not, it is spent starting a search against a midnight deadline. Ironmark represents owners and buyers of Florida industrial and net-leased property through investment sales and buyer representation, and prepares a defensible valuation before anything goes to market.

What is boot, and what happens if I trade down or pay off debt?

Boot is money or other property received in an exchange. Gain is recognized to the extent of it, capped at realized gain (IRC §1031(b)), and no loss is recognized (IRC §1031(c)). Cash boot is any money the taxpayer receives — proceeds not reinvested, cash pulled at the relinquished closing, or a trade-down in value. Mortgage boot is less obvious: liabilities assumed by the other party, or to which the relinquished property is subject, are treated as money received (Treas. Reg. §1.1031(d)-2). For an owner-user carrying a long-amortized mortgage on a low-basis building, debt relief is frequently the larger number even though no cash changes hands. The netting rule is asymmetric, and this is the point most people have backwards: under Example 2 of Treas. Reg. §1.1031(d)-2, consideration given as cash or other property is offset against consideration received as liability relief — so writing a check at the replacement closing cures mortgage boot — but cash received is not offset by liabilities assumed on the replacement property, so a bigger mortgage does not cure cash boot. The 2025 Instructions for Form 8824 carry the same rule into line 15. It follows that debt relief can be covered either by new debt or by the taxpayer’s own cash at the replacement closing, since both are consideration given — which route fits a given file is a question for your CPA and your lender. Non-like-kind property in the deal, such as equipment, inventory and goodwill, is other property under §1031(b), and its fair market value belongs in boot.

What happens to the depreciation already taken on the building?

It is deferred rather than erased, and it does not reset in the replacement property. Nonresidential real property under MACRS is depreciated straight line (IRC §168(b)(3)) over 39 years (IRC §168(c)), and additional depreciation means adjustments in excess of straight line (IRC §1250(b)(1)) — so a post-1986 building generally has no §1250 ordinary-income recapture. What it has instead is unrecaptured section 1250 gain (IRC §1(h)(6)(A)), taxed at a statutory maximum rate of 25 percent when recognized (IRC §1(h)(1)(E)); a fully deferred exchange recognizes no gain, so none of that layer is taxed in the year of the exchange. The recapture potential travels with the exchange instead (IRC §1250(d)(4); Treas. Reg. §1.1250-3(d)) — and if the building was cost-segregated, some components are §1245 property whose recapture is ordinary income, computed on Form 8824 line 21 ahead of the line 22 gain, so a small amount of boot in that exchange can be entirely ordinary income.

The replacement property does not receive a fresh depreciation schedule either. It takes carryover basis — the basis of the property exchanged, decreased by money received and increased by gain recognized (IRC §1031(d)). Treas. Reg. §1.168(i)-6 then splits it: the exchanged basis continues over the remaining recovery period of the relinquished property using the same method and convention, while only the excess basis — new money above the carried-over amount — is placed in service in the replacement year on its own schedule. A taxpayer may elect out of §1.168(i)-6 on a timely filed original return for that year. Trading up does not reset the clock on carried-over basis; only new basis buys new depreciation, which makes cost segregation a question about the excess basis rather than the whole purchase price.

What if the building is owned by a partnership, or by several people who want different things?

The taxpayer that sells must be the taxpayer that buys, and a partnership is a separate taxpayer from its partners. An interest in a partnership is not real property, except an interest in a partnership with a valid IRC §761(a) election (Treas. Reg. §1.1031(a)-3(a)(5)(iii)(C)), so where a building sits in a multi-member LLC taxed as a partnership the entity does the exchange and a member cannot exchange a membership interest. A single-member LLC is different: the 2025 Instructions for Form 8824 treat an exchange by a disregarded entity such as a single-member limited liability company as an exchange by its owner, so relinquishing from one and taking title in another owned by the same taxpayer does not break taxpayer identity. That collides with the usual owner-user reality, in which some owners want cash and some want to keep deferring. Three structures are used: the partnership exchanges and redeems the cash-out owners later; a “drop and swap,” distributing undivided tenancy-in-common interests before the sale; and a “swap and drop,” distributing interests in the replacement property afterward. The risk sits in the statute: §1031(a)(1) requires the relinquished property to have been held for productive use in a trade or business or for investment, and a tenancy-in-common interest distributed days before closing invites the argument that what the partner disposed of was an excluded partnership interest. There is no statutory holding period and no IRS safe harbor for business or investment real property, so timing and documentation carry the weight — and the IRS asks about both structures on the return, at 2025 Form 1065, Schedule B, Questions 11 and 12. Either route is a decision for counsel and the CPA well before the building goes to market.

When do the related-party rules apply?

Whenever property on either end of the exchange comes from or goes to a person related under IRC §267(b) or §707(b)(1) — spouses, siblings, ancestors, lineal descendants, controlled entities, and entities under common control (IRC §1031(f)(3)). If a taxpayer exchanges property with a related person and, before the date two years after the last transfer, either the related person disposes of the property received or the taxpayer disposes of the like-kind property received from the related person, there is no nonrecognition of gain or loss on that exchange (IRC §1031(f)(1)). Three exceptions exist and no more: a disposition after the earlier death of either party; an involuntary conversion under §1033 where the exchange preceded the threat of conversion; and a showing to the Secretary’s satisfaction that neither the exchange nor the disposition had tax avoidance as one of its principal purposes (IRC §1031(f)(2)). IRC §1031(f)(4) reaches any exchange structured to avoid the purposes of the subsection.

A qualified intermediary does not launder a related-party exchange: the 2025 Instructions for Form 8824 state that an exchange made indirectly with a related party includes one made through an intermediary such as a qualified intermediary or an exchange accommodation titleholder, and Rev. Rul. 2002-83 holds that a taxpayer who transfers relinquished property to a qualified intermediary in exchange for replacement property formerly owned by a related party is not entitled to nonrecognition under §1031(a) if the related party receives cash as part of the transaction. For a Florida taxpayer this is controlling law: in Ocmulgee Fields, Inc. v. Commissioner, 613 F.3d 1360 (11th Cir. 2010), the Eleventh Circuit — whose jurisdiction includes Florida — applied §1031(f)(4) to an exchange run through a qualified intermediary where the replacement property came from a related entity that took cash, holding that the taxpayer bears the burden under §1031(f)(2)(C) and that basis shifting between related parties is itself evidence of a tax-avoidance purpose. The reporting obligation also outlives the closing: Form 8824 must be filed for the two years following the year of a related-party exchange.

Why do 1031 exchanges fail?

Almost always for one of a short list of mechanical reasons, each traceable to a specific rule, and almost none of which can be repaired after the fact.

• The seller touched the money. Receipt of the full consideration before receiving replacement property makes it a sale, and receipt by an agent — including the seller’s own attorney — counts. Treas. Reg. §1.1031(k)-1(f)(1)–(2).
• The intermediary was engaged after the closing. Assignment requires written notice to all parties on or before the transfer date. (g)(4)(v).
• A disqualified person served as the intermediary — the seller’s own attorney, CPA, employee, or real estate broker inside the two-year lookback. (k)(2).
• The identification was defective: not written, not signed, sent to the wrong person, ambiguously described, or delivered after midnight on day 45. (b)(2)(i), (c)(2), (c)(3).
• Over-identification, treated as if nothing had been identified. (c)(4)(ii).
• Closing on something not identified, or not substantially the same as identified. (d)(1).
• The 180 days was silently cut to the return due date by a fourth-quarter closing with no extension filed. IRC §1031(a)(3)(B)(ii).
• Trading down, pulling cash, or shedding debt without replacing it. IRC §1031(b); Treas. Reg. §1.1031(d)-2.
• A related party somewhere in the chain, which an intermediary does not cure. IRC §1031(f); Rev. Rul. 2002-83; Ocmulgee Fields, 613 F.3d 1360 (11th Cir. 2010).
• The taxpayer changed between the two closings. A disregarded single-member LLC is fine; a partnership is a separate taxpayer. Treas. Reg. §1.1031(a)-3(a)(5)(iii)(C).
• Business assets went into the deal unallocated, leaving the real-property share unproven. IRC §1060; Form 8594.
• The taxpayer already owned the replacement property, or tried to exchange into improvements on land already owned. Rev. Proc. 2000-37 §4.05, added by Rev. Proc. 2004-51; DeCleene v. Commissioner, 115 T.C. 457 (2000). A reverse or improvement exchange must instead be parked with an exchange accommodation titleholder under Rev. Proc. 2000-37 §4.02, whose 45-day, 180-day and combined 180-day periods are flat, with no return-due-date mechanism.

What is different about a 1031 exchange in Florida?

Three things: the deed tax, the entity-level tax and hurricanes. A §1031 exchange defers federal income tax; it does not exempt the deed from Florida documentary stamp tax. Per the Florida Department of Revenue, the rate is $0.70 per $100 (or portion) of consideration on documents transferring an interest in Florida real property in every county except Miami-Dade (Fla. Stat. §201.02(1)(a)); Miami-Dade applies $0.60 per $100 plus a surtax of $0.45 per $100 that does not apply to single-family dwellings (Fla. Stat. §201.031). All parties to the document are liable regardless of who agrees to pay, and mortgages and liens are taxed separately at $0.35 per $100 (Fla. Stat. §201.08). A reverse or improvement exchange involves an additional conveyance; how Florida taxes that second transfer depends on the structure, so price it with Florida counsel before committing to a parking arrangement.

The entity matters more in Florida than owners expect. Per the Florida Department of Revenue, Florida’s corporate income and franchise tax rate is 5.5 percent for tax years beginning on or after January 1, 2022, and it applies to corporations doing business, earning income or existing in Florida, to LLCs classified as corporations, and to S corporations that pay federal income tax on line 23c of Form 1120S — but not to sole proprietorships and individuals, to disregarded single-member LLCs unless owned by a corporation, or to partnerships and multi-member LLCs taxed as partnerships unless a corporate member exists. Many Florida owner-users put the building into a C corporation decades ago; if yours is one of them, that is a threshold question for your CPA.

Florida also draws federally declared disasters most years, and the IRS has a standing rule for exchanges in flight. A 45-day identification period, a 180-day exchange period, or a reverse-exchange safe-harbor period whose last day falls on or after the date of a federally declared disaster is postponed by 120 days or to the last day of the general disaster extension period announced for that specific disaster, whichever is later — capped by the due date, including extensions, of the return for the year of transfer, and by one year under IRC §7508A(a) (Rev. Proc. 2018-58 §17.02(1)). Relief depends on the IRS issuing guidance for that disaster, and the qualifying grounds are broad: it is enough that the principal place of business of any party — intermediary, settlement attorney, lender, or title insurer — sits in the covered area, even where both properties are far from the storm (§17.02(2)).

What Ironmark delivers, and who this is for

Ironmark’s engagement covers the real estate on both ends of the exchange: timeline planning built backward from the closing date; disposition advisory for the relinquished property, including the pricing consequence of vacant delivery versus a sale-leaseback; replacement property identification and pipeline development across Florida industrial, land, outdoor storage and net-leased assets; investment underwriting of every candidate, covering cap rate benchmarking, tenant and lease review, submarket risk and hold projections; and coordination with your qualified intermediary, attorney, CPA and lender through both closings. The work fits owners in a few recognizable situations:

• Owner-users whose operating business occupies the building, heading toward retirement, a sale of the business, or simply less work
• Property owners deferring capital gain into net-leased or industrial replacement property
• Investors selling one asset and reinvesting into Florida industrial, land, or industrial outdoor storage
• Families and partnerships planning a tax-efficient disposition where the entity structure has to be reviewed first

Where Ironmark sources replacement property in Florida

Statewide, across Florida’s core industrial corridors: Miami-Dade, Broward, Palm Beach, Orlando, Tampa Bay, Jacksonville, and Lakeland/Polk County, plus land, outdoor storage, and net-leased investment product. Palm Beach County industrial carried a 6.5% average cap rate and 7.6% overall vacancy in the third quarter of 2026, while Miami-Dade asking rents averaged $21.01 per square foot NNN against 7.8% vacancy (Ironmark quarterly briefs, 3Q 2026). That submarket-level read decides whether a replacement candidate is priced correctly before it goes on an identification list; current briefs are published in Ironmark’s market reports. Market pages: Miami · Fort Lauderdale · West Palm Beach · Orlando · Tampa · Jacksonville · Lakeland · Sarasota · Fort Myers · Naples · Melbourne · Port St. Lucie.

Frequently Asked Questions

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Sources

Statutory and regulatory material: IRC §§1(h), 168, 267, 707, 761, 1014, 1031, 1060, 1250, 7508A; Pub. L. 115-97 §13303; Treas. Reg. §§1.1031(a)-1, 1.1031(a)-3, 1.1031(d)-2, 1.1031(k)-1, 1.1250-3, 1.168(i)-6; Rev. Rul. 2002-83; Rev. Rul. 2004-86; Rev. Proc. 2000-37; Rev. Proc. 2004-51; Rev. Proc. 2010-14; Rev. Proc. 2018-58; 2025 Instructions for Form 8824; 2025 Form 1065, Schedule B; Ocmulgee Fields, Inc. v. Commissioner, 613 F.3d 1360 (11th Cir. 2010); DeCleene v. Commissioner, 115 T.C. 457 (2000). Florida material: Florida Department of Revenue guidance on documentary stamp tax and on corporate income/franchise tax; Fla. Stat. §§201.02(1)(a), 201.031, 201.08. Market figures: Ironmark Florida Net-Lease Brief, 2Q 2026, and Ironmark quarterly Florida industrial briefs, 3Q 2026 — a single named source per metric, refreshed quarterly.

Ironmark Capital Advisory is a commercial real estate brokerage and is not a tax advisor, certified public accountant, law firm, or qualified intermediary. Nothing on this page is tax, legal, accounting, or appraisal advice. Information obtained from sources deemed reliable but not guaranteed; verify prior to any decision. Under Treas. Reg. §1.1031(k)-1(k)(2), a real estate broker who has represented a taxpayer within the preceding two years is a disqualified person and may not serve as that taxpayer’s qualified intermediary, and Ironmark does not act as a qualified intermediary in any transaction. Consult your own CPA, your own attorney, and a qualified intermediary before acting. Reach Ironmark at (561) 621-5450 or hello@ironmarkcre.com.