A §1031 like-kind exchange lets a commercial real estate investor defer federal capital gains tax (and the §1411 net investment income tax) by reinvesting the proceeds of a sale into a replacement property of equal or greater value. For NYC commercial property owners sitting on basis from a 2010s acquisition, the deferral is often the difference between a clean recycling of capital and a ~30% drag from federal + state tax.
The 45-Day and 180-Day Clocks
The day the relinquished property closes, two clocks start. Within 45 calendar days you must formally identify replacement property in writing to your qualified intermediary. Within 180 days from the original closing you must close on the replacement. Both windows are strict — there are no extensions absent a presidentially-declared disaster.
Identification Rules
You can identify up to three properties without regard to value (the "three-property rule"), or any number of properties whose aggregate fair market value does not exceed 200% of the relinquished property's value (the "200% rule"), or — if you actually close on 95% by value of those identified — any number under the "95% exception." Most NYC commercial investors use the three-property rule because the deal sizes don't fit cleanly inside the 200% constraint.
Like-Kind in Practice
For real property the like-kind test is very loose: a Manhattan office building exchanges into a Brooklyn multifamily portfolio, a NoMad retail condo, or a Westchester industrial site without issue. The §1031 reform of 2017 eliminated personal property exchanges, so equipment and FF&E don't qualify. Reverse exchanges (buying the replacement before selling the relinquished) are also valid but require an Exchange Accommodation Titleholder structure that adds cost and complexity.
- Engage a qualified intermediary before closing — the seller can never have constructive receipt of the proceeds.
- Build a written buy box now if you plan to sell in the next 12 months; 45 days disappears quickly in a thin Manhattan market.
- Skyline maintains a current list of off-market replacement properties in every Manhattan submarket for exchangers.
- Coordinate with your CPA on NYS and NYC tax — both honor §1031 for real property at the state level.
Robert Khodadadian and Skyline Properties have closed $976M+ in NYC commercial transactions, many of them involving 1031 exchangers on the buy or sell side. The firm's off-market pipeline is structured specifically for the 45-day clock — a vetted, ready-to-tour inventory of replacement candidates. Email info@skylineprp.com or call (212) 537-9239 for a confidential consultation on your exchange strategy.