1031 Exchanges-Mastering Tax Deferral for Oregon Real Estate
Build wealth. Defer taxes. Master the exchange strategies Oregon investors are counting on you to know.
Course Description
Your investor clients don't just want a broker—they want a strategist. This six-hour course gives Oregon real estate brokers a comprehensive, practitioner-level understanding of IRC Section 1031 tax-deferred exchanges, from foundational rules through advanced structures your clients will actually encounter.
You'll move well beyond textbook basics. Starting with the fundamentals of like-kind property and qualification rules, the course advances through delayed exchange mechanics, reverse and improvement exchanges, and the critical nuances of boot recognition, partial exchanges, and depreciation recapture. A dedicated module on related-party rules and compliance traps addresses the scenarios most likely to trigger IRS scrutiny.
What sets this course apart is its Oregon focus. You'll examine state-specific tax implications, Oregon capital gains considerations, and how local market conditions shape exchange strategy. The final module puts it all together with practical broker applications—identifying exchange candidates, building referral networks with qualified intermediaries, and positioning yourself as the go-to resource for investment-minded clients.
Modules Include: IRC §1031 Fundamentals • Delayed Exchange Mechanics • Complex Exchange Structures • Boot, Partial Exchanges & Recapture • Related-Party Rules & Compliance Traps • Oregon State-Specific Considerations • Practical Application for Brokers
Course Preview
Under federal tax law established by the Tax Cuts and Jobs Act of 2017, only real property qualifies for Section 1031 tax-deferred exchanges. This means personal property, equipment, and unrelated intangible assets are excluded.
The "like-kind" standard is very flexible.
For example, you can exchange a residential duplex for raw land, or a commercial warehouse for an apartment complex. However, you must hold both the relinquished and replacement properties for productive use in a business or for investment.
Certain assets never qualify. These include stocks, bonds, notes, partnership interests, primary residences, and property held primarily for sale, such as developer inventory or short-term flips. Some rare exceptions include cooperative housing stock and specific irrigation company shares.
Oregon aligns with federal eligibility rules but adds its own requirements. Oregon law regulates Exchange Facilitators, also called Qualified Intermediaries.
Additionally, if you exchange Oregon real estate for out-of-state property, the state's clawback law requires you to file Form OR-24 annually to track the property until you sell it.
Now that we understand these eligibility standards, we can transition to how to execute the exchange. In the next section, we will examine statutory timelines and basis calculations.
Building on the eligibility standards we discussed, deferred exchanges must meet two strict deadlines to maintain tax-deferred status. You must identify replacement property in writing within 45 days of transferring the relinquished property.
You must then receive that property by the earlier of 180 days after the transfer or your tax return’s due date, including extensions, for that tax year. Missing either deadline by a single day invalidates the exchange.
When you successfully acquire the replacement property, your financial position rolls over through a carryover basis. This new basis equals the basis of the property given up, decreased by cash received and increased by recognized gain.
For example, the basis of the new retail property is generally the same as the warehouse’s adjusted basis ($300,000), adjusted for cash or non-like-kind property received or paid, and recognized gain or loss.
Exchanging a property with a $300,000 basis for a $500,000 property defers the $200,000 gain. This requires a qualified like-kind exchange under the Internal Revenue Code with no boot, adhering to both the 45-day and 180-day timelines.
In the next section, we will explore how this tax deferral operates in practice, including the mechanics of boot and post-TCJA scope.
Like-kind exchange rules provide tax deferral rather than tax forgiveness. Your investment continues in a modified form, postponing capital gains tax until you sell the replacement property in a taxable transaction.
The Tax Cuts and Jobs Act of 2017 substantially narrowed this deferral scope. For exchanges completed after December 31, 2017, tax deferral applies only to real property.
The law also excludes real property held primarily for sale. If an exchange includes like-kind property plus other property or cash, you must recognize gain up to the value of that cash or extra property.
We call this non-qualifying value ‘boot’. Next, we will break down how boot is calculated and its precise effect on tax deferral mechanics.
A 1031 exchange defers, rather than eliminates, your tax liability to maintain investment continuity. However, receiving “boot” introduces immediate, partial taxation.
Your recognized gain is the lesser of your total realized gain or the total boot received. Any remaining realized gain becomes deferred gain, which rolls into your replacement property as a substituted basis.
As we discuss how these transactions work, you will encounter three primary categories of boot:
- Cash boot: receiving money directly at closing or leaving proceeds uninvested.
- Mortgage boot: acquiring a replacement property with a lower mortgage balance, resulting in a net reduction of liabilities.
- Non-like-kind property: receiving property that doesn’t qualify as like-kind.
While boot creates a partially taxable event, it doesn’t destroy the exchange, and losses remain unrecognized.
Next, we’ll examine which property types qualify following the Tax Cuts and Jobs Act of 2017, which narrowed these transactions strictly to real property exchanges effective January 1, 2018.
Following the Tax Cuts and Jobs Act restriction of exchanges to real property, your ownership structure determines whether you qualify for a tax-deferred exchange.
You cannot exchange a partnership interest for real property, even if the partnership only owns real estate. However, if the partnership elects to be excluded from partnership tax treatment, you are treated as directly owning a share of the underlying assets.
This portion then qualifies for an exchange. Thus, a multi-member LLC taxed as a partnership cannot execute an exchange for a single member, while a single-member LLC treated as a disregarded entity allows for a smooth exchange.
When we look at alternative structures, co-ownership offers other options. A Tenancy-in-Common interest qualifies as real property if it meets federal guidelines to avoid business classification.
Similarly, a Delaware Statutory Trust treats you as owning an undivided fractional interest in the underlying real estate. In Oregon, you must file Form OR-24 for out-of-state exchanges, regardless of the structure used.
Following those ownership structure requirements, we must examine how federal deferral interacts with Oregon tax law. Under federal law, a carryover basis defers rather than eliminates your capital gains tax.
Oregon generally conforms to this federal framework, meaning a valid federal 1031 exchange defers your Oregon state income tax as well.
The main difference occurs when you exchange Oregon real estate for a replacement property in another state. Oregon keeps the right to tax your deferred gain when you eventually sell that out-of-state property.
Oregon law outlines how these out-of-state deferred gains are treated. While the statute does not explicitly mandate Form OR-24, you must still file this reporting form annually until you sell the replacement property. This requirement continues even if you move away and have no other Oregon filing requirements.
With this state compliance established, we will next explore the specific holding purpose requirements for property held for productive use or investment.
In our profession, we know that the foundational rule of a successful exchange is your intent. Under Section 1031 of the Internal Revenue Code, you recognize no gain or loss only when both the property you sell and the property you buy are held for productive use in a trade or business or for investment.
This dual-leg requirement establishes a strict holding standard that excludes primary residences and vacation homes used mainly for personal purposes. This holding purpose distinguishes qualified real estate from inventory held by a dealer.
You must maintain this intent post-exchange. For instance, in Magneson v. Commissioner, contributing your replacement property to a partnership did not defeat the holding requirement.
To defer taxes in a 1031 exchange, you must hold both your relinquished and replacement properties for productive business use or investment.
Under federal tax rules, the key factor is your intent at the time of the exchange. Courts evaluate this intent by looking at the facts of each transaction.
Tax-deferred exchanges do not apply to properties held primarily for sale. This exception excludes “dealer property” and inventory.
For example, if you buy a distressed home, make quick, minor updates, and list it for resale, the IRS views the property as held for sale. Short-term flips and builder inventory do not qualify for tax deferral.
This issue relates directly to Oregon real estate rules. Under state regulations effective July 1, 2025, wholesaling residential property is defined as marketing a home when you hold an equitable interest for fewer than 90 days and spend less than $10,000 on improvements. These activities strongly indicate the property is held for sale rather than investment.
Next, we will explore how safe harbor rules interact with dwelling units and unproductive land.
While investment intent survives a partnership contribution, exchanging a partnership interest itself generally does not qualify for tax-deferred treatment.
Federal tax law prohibits exchanging a partnership interest for real estate. Similarly, selling an interest in an LLC that owns investment real estate is treated as selling an entity interest, making it ineligible.
However, if the entity has a valid election to be excluded from partnership tax rules, the interest is treated as an interest in the underlying real property. Alternatively, co-owners in a tenancy-in-common who share title without operating as a business entity can qualify for exchange treatment.
When you own entity interests, Oregon imposes strict disclosure rules. If you own over five percent of an entity and negotiate to sell or exchange its property, Oregon considers you a principal.
You must disclose your license status on all advertising and in writing on the first agreement document. Undisclosed principal status constitutes grounds for discipline.
Building on holding purpose requirements, we examine the like-kind doctrine’s parameters. Following the 2017 Tax Cuts and Jobs Act, Section 1031 applies exclusively to real property. This excludes partnership interests and properties held primarily for sale.
The like-kind standard remains broad, focusing on the property’s nature or character rather than its grade or quality. Differences between improved and unimproved land, or fee interests and 30-year leaseholds, are immaterial.
You can exchange an unimproved Bend lot for a Portland commercial building, or a duplex for a farm⁴. However, domestic and foreign real properties are not considered like-kind, so you cannot exchange U.S. property for international property.
Next, we examine which specific property uses qualify for Section 1031 treatment.
Instructor
Don Gorman
Don Sr. has been in the real estate business for over 40 years, working as a broker, running real estate offices, and developing property. He's the founder of Realestateschool.org and it's principal instructor. Don Sr. has a teaching degree from the University of Washington and has been teaching real estate for over 35 years.
Details
- Clock Hours: 6
- Format: Slides - includes video, text & images