1031 Exchange Documents: A Checklist and Form 8824 Guide

Key takeaways

An exchange is built from paper. The exchange agreement, the assignment notices, the written identification and both closing statements are what show the IRS you never had access to the sale money.
Several documents must exist before your sale closes. Once the money reaches you, no later paperwork can fix it.
You report the exchange on IRS Form 8824 with your return for the year you sold. If the exchange was with a related party, you also file it for the 2 years after.
Form 8824's Part III works out four numbers that matter for years: your realized gain, your recognized (taxable) gain, your deferred gain and your basis in the new property.
Keep every exchange record until the period of limitations ends for the year you finally sell the replacement property. In a chain of exchanges, that can mean decades.
This guide is general education, not tax or legal advice. Your CPA, your attorney and your qualified intermediary should review your own documents.

What counts as a 1031 exchange document?

A 1031 exchange is a tax rule from Section 1031 of the Internal Revenue Code. It lets you sell investment or business real estate and defer the tax on your gain by buying other investment or business real estate. My guide to the 1031 exchange rules covers the rules themselves. This guide is about the paper that proves you followed them.

A few terms first, since they show up on every page of an exchange file.

Relinquished property is the property you sell.
Replacement property is the property you buy.
Qualified intermediary, or QI, is the company that holds your sale money during the exchange so you never touch it.
Basis is your tax cost in a property. It starts as what you paid, goes up with improvements and goes down with depreciation.
Boot is anything you receive in the exchange that isn't like-kind real estate. Cash is boot. So is debt you pay off and don't replace. Boot is taxable.
Settlement statement is the closing statement from the escrow or title company. It lists the price, the loan payoff, every closing cost and where each dollar went.

A 1031 exchange document is any record that shows one of four things. It shows what you sold and bought. It shows when each step happened. It shows who held the money. And it shows the numbers your CPA needs for the tax return.

Some documents come from you. Others come from your QI, your escrow officer, your lender or your CPA. A few come from the IRS itself, in the form of the tax forms you file.

Why does the paperwork matter so much in a 1031 exchange?

In a regular sale, the paperwork records what happened. In a 1031 exchange, the paperwork is much of what happened.

Here's why. The IRS treats you as having sold for cash if you receive the sale money, or could get it on demand. Tax people call that "constructive receipt." If it happens, the exchange fails, even if you meant to reinvest every dollar.

The Treasury regulation at 26 CFR §1.1031(k)-1 gives you a way to avoid that. You use a qualified intermediary under a written agreement. The regulation says that agreement must expressly limit "the taxpayer's rights to receive, pledge, borrow, or otherwise obtain the benefits of money" the QI holds.

So the protection comes from a document. The same is true of the other key steps.

The assignment notice shows the QI stepped into your sale contract. The regulation treats the QI as a party to an assigned agreement only if "all parties to that agreement are notified in writing of the assignment."
The identification notice shows you named replacement property in time. The regulation requires it to be in "a written document signed by the taxpayer."
Form 8824 tells the IRS the exchange happened and works out the tax.

If the IRS ever asks about your exchange, your file is your answer. A file with every signed agreement, notice and statement in order tells a clear story. A file with gaps forces you to rebuild that story years later, when people have moved on and records are hard to find.

What documents do you need when you sell?

The sale side is where most of the critical paper lives. Several of these documents must be signed before your closing date.

The purchase and sale agreement, with exchange language

This is the contract with your buyer. For an exchange, it should include a short clause that does three things. It says you intend to do a 1031 exchange. It asks the buyer to cooperate at no cost or risk to them. And it lets you assign your rights in the contract to your QI.

Your real estate agent or attorney usually adds this clause. It costs nothing to include, and it avoids an argument with the buyer later.

The exchange agreement with your QI

This is the contract between you and your QI. It sets out how the QI will receive and hold your money, when the money can be released and what fees the QI charges.

It must be signed before the sale closes. That's the single most important timing rule in the whole file. My guide to choosing a qualified intermediary covers what to look for in the agreement, how the money can be held and what questions to ask.

The assignment of the sale contract

This short document assigns your rights in the sale contract to the QI. It turns the QI into a party to the sale for tax purposes, even though the deed still goes straight from you to the buyer.

The notice of assignment to the buyer

The buyer must get written notice of the assignment on or before the closing date. Your QI usually prepares it, and the buyer signs or acknowledges it. Keep the signed copy.

The seller's settlement statement

This is the escrow or title company's closing statement for your sale. Check three things on it.

The sale proceeds go to your QI, not to you.
The loan payoff matches your lender's payoff statement.
Each closing cost is listed, so your CPA can sort out which costs reduce your gain and which might count as boot.

The settlement statement is also where accidental boot shows up. Rent prorations credited to the buyer and security deposits you hand over are paid from your proceeds. My guide to 1031 exchange costs and fees explains which items your CPA may treat as boot and why.

The lender's payoff statement

If you had a loan, your lender issues a payoff statement before closing. It shows the exact amount needed to pay the loan off. That number matters later, because debt you pay off is part of what you need to replace to defer all of the tax.

Form 1099-S

The person who closes the sale, usually the settlement agent, generally files Form 1099-S with the IRS. The instructions for Form 1099-S say, "If you are the person responsible for closing the transaction, you must file Form 1099-S." Box 2a reports "the total gross proceeds from the real estate transaction, generally the sales price."

So the IRS gets a record that you sold real estate. Form 8824 is what tells the IRS why your return doesn't show a fully taxable sale. Keep your copy of the 1099-S with your exchange file, and make sure your CPA has it.

State forms

Some states add their own paperwork. California is the most common example. California generally withholds tax when real property is sold, and a 1031 exchange has its own rules on that withholding. California also has a form for exchanges that move your investment out of state, whether or not you still live there. The FTB 3840 instructions say the form applies to exchanges of "real property located in California for like-kind property located outside of California." It "must be filed for the taxable year of the exchange and for each subsequent taxable year," generally until the California gain is recognized.

Your escrow officer usually knows the local withholding forms. Your CPA handles the state tax forms.

What documents do you need during the 45-day window?

Two clocks start the day your sale closes. You have 45 days to identify replacement property in writing. You must receive the replacement property within 180 days or your tax return due date (with extensions) for the year of the sale, whichever comes first.

Those deadlines come from Section 1031(a)(3). The IRS fact sheet on like-kind exchanges says the limits can't be extended for any hardship, except in presidentially declared disasters.

The identification notice

This is the letter or form that names your possible replacement properties. Under the regulation, it must be a written document signed by you. It must be delivered before day 45 ends, to a person involved in the exchange other than you or a "disqualified person." In practice, that's almost always your QI.

Each property needs a clear description, such as a street address or a legal description. For an interest in a Delaware statutory trust, the description is usually the trust's full legal name. A Delaware statutory trust, or DST, is a trust that owns real estate and sells interests in it to investors.

How many properties you can name, and what happens if you name too many, is its own topic. My guide to the 1031 identification rules covers the three-property rule, the 200% rule and sample letters.

One point belongs in a documents guide. A backup property only helps if it's on that signed list. A backup identified late only works if it was identified in writing within 45 days. You can't add one on day 60 because your first choice fell through.

Proof that the notice arrived

Get written proof that your QI received the notice before the deadline. An email reply from the QI confirming receipt, with a date and time, is common. A delivery receipt also works.

This sounds small. But if your identification is ever questioned, the date it was delivered is the whole question.

Any changes or revocations

You can change your identification before day 45 ends, but the change must also be in writing and delivered the same way. Keep every version, in order, with its proof of delivery. After day 45, the list is locked.

What documents do you need when you buy?

The purchase side mirrors the sale side. The QI steps into your purchase contract, and the money flows from the QI to the closing.

The purchase contract and its assignment

You sign a purchase contract with the seller of your replacement property. Then you assign your rights in it to the QI, and the seller gets written notice of that assignment. The pattern is the same as on the sale side, and the notices matter for the same reason.

The buyer's settlement statement

This shows the price, the exchange funds the QI sent, any new loan and any cash you added. Your CPA uses it to check whether you bought enough property, reinvested all the cash and replaced the debt.

Check the title, too. The taxpayer that sold must be the taxpayer that buys. If you and your spouse sold, both of you should generally be on title to what you buy. A change in the name on title can break the exchange.

Loan documents

If you take on a new loan, keep the note, the deed of trust or mortgage and the lender's closing statement. Your new debt can offset the debt you paid off on the sale, so the loan amount matters to the tax math.

The deed

The deed shows that you took title. It usually passes straight from the seller to you. The QI doesn't need to appear on it.

The QI's final accounting

When the exchange ends, the QI sends a statement of every dollar it received and paid out. It shows the money in from your sale, the money out to your purchase, any fees and any interest. If money is left over and paid to you, it shows that too.

Leftover money paid to you is generally boot. This statement is often where you and your CPA first see it.

What documents does a DST purchase add?

Many exchangers buy an interest in a DST as all or part of their replacement property. Under IRS Revenue Ruling 2004-86, "A taxpayer may exchange real property for an interest in the Delaware statutory trust" described in the ruling, if the other 1031 rules are met. So a DST interest can qualify as replacement property. My DST guide explains how they work.

A DST interest is also a security. So the paperwork looks more like an investment purchase than a real estate closing. Here's what to expect.

The private placement memorandum

A private placement memorandum, or PPM, is the offering document. It describes the property, the debt, the fees, the sponsor, the risks and the trust's rules. A sponsor is the company that puts the DST together and manages it.

Read it before you sign anything. The SEC's investor bulletin on private placements notes that private placement memoranda "typically are not reviewed by any regulator." The same bulletin says that with private placements, "you should be prepared to hold the securities indefinitely."

The subscription agreement and investor questionnaire

The subscription agreement is your signed offer to buy the interest. It usually comes with a questionnaire about your finances and experience.

Most DSTs are sold only to accredited investors. Under the SEC's accredited investor bulletin, an individual generally qualifies with income above $200,000 in each of the past two years ($300,000 with a spouse or spousal equivalent) and a reasonable expectation of the same this year. Net worth above $1 million, not counting a primary residence, also qualifies. So does holding a Series 7, 65 or 82 license in good standing. Depending on the offering, you may be asked for proof.

The QI's funding instructions

Your QI sends the exchange money directly to the sponsor or its escrow agent. You sign a direction letter telling the QI to do so. The money must never pass through your own account.

The trust documents and confirmation

After the sponsor accepts your subscription, you get a confirmation of the interest you bought and your share of the trust. Keep it with the trust agreement and the PPM. These are the documents that describe what you own.

Because DST properties are already acquired by the sponsor, closing can often take two to three business days once the paperwork, funding and approvals are complete. That can help late in an exchange. It doesn't change the risks. DST interests are illiquid, you have little control, distributions are not guaranteed and you can lose your entire investment.

Annual tax statements

Each year, the sponsor sends a statement of your share of the trust's income and expenses. You'll need those every year you own the interest. My guide to DST tax reporting explains what's on them and how they land on your return.

The 1031 exchange checklist, step by step

Here is the full checklist in the order things happen. Print it, tape it inside your exchange folder and check items off as you go.

Step 1: Before you list, gather your history

Pull together the records that prove your basis in the property you're selling. That means the closing statement from when you bought it, records of improvements, and your depreciation schedule from past tax returns. If the property itself came from an earlier exchange, you also need that exchange's Form 8824. Your basis chain runs through it.

Ask your CPA to estimate your gain, your depreciation and your debt. That tells you how much property, cash and debt you'll need to replace.

Step 2: Pick a QI and read its agreement

Get the exchange agreement early, so your attorney has time to read it. Look at how the money will be held and when it can be released.

Step 3: Add exchange language to the sale contract

Have your agent or attorney add the cooperation and assignment clause before you sign the sale contract.

Step 4: Before closing, sign the exchange agreement and the assignment

Sign the exchange agreement and the assignment of the sale contract. Make sure the buyer receives written notice of the assignment on or before closing day.

Step 5: At closing, check the settlement statement

Confirm the proceeds go to the QI. Ask your CPA to look at the draft statement before you sign, while you can still change how costs are paid.

Step 6: Mark your dates the day you close

Write down day 45. Write down your receipt deadline: 180 days or your tax return due date (with extensions) for the year of the sale, whichever comes first. If your sale closed late in the year, tell your CPA you may need to file an extension, such as Form 4868 for individuals, which the IRS describes as giving "six (6) more months to file." My 1031 exchange deadline calculator works out the dates for you.

Step 7: Identify in writing by day 45

Sign the identification notice, deliver it to the QI and get proof it arrived. Name real backups.

Step 8: Close on the replacement property

Sign the purchase contract and its assignment, and give the seller written notice. Check the vesting on title. Collect the settlement statement, loan documents and deed. For a DST, collect the PPM, the signed subscription agreement, the funding letter and the confirmation.

Step 9: Get the QI's final accounting

Ask for it as soon as the exchange closes. Compare it to both settlement statements. Every dollar should match.

Step 10: File Form 8824 with your return

File it with your tax return for the year you sold the relinquished property. If the exchange was with a related party, put a reminder on your calendar to file it again for each of the next two years.

Step 11: Store the file for the long run

Keep the full file until the period of limitations runs out for the year you finally sell the replacement property in a taxable sale. More on that below.

How do you fill out Form 8824?

Form 8824 is the IRS form for like-kind exchanges. The IRS says it's used "to report each exchange of business or investment property for property of a like kind." Here is how it's organized, part by part, based on the 2025 form and the Form 8824 instructions.

Who files it, and when

The instructions say that if you transferred property in a like-kind exchange during the year, "you must file Form 8824 with your tax return for that year." The year that counts is the year you gave up the relinquished property. If you sold in December and bought in March, the form goes on the return for the year you sold.

There's one more filing rule. The instructions add, "Also file Form 8824 for the 2 years following the year of a related party exchange."

Part I: information on the exchange (lines 1 to 7)

Part I is mostly descriptions and dates. Your documents supply every answer.

Line	What it asks	Where the answer comes from
1	Description of the like-kind property given up	Your old deed or settlement statement; the instructions ask for "the address and type of property"
2	Description of the like-kind property received	Your new deed, or the DST confirmation
3	Date the property given up was originally acquired	Your original purchase closing statement
4	Date you actually transferred your property	Your sale settlement statement
5	Date the replacement was identified by written notice	Your signed identification notice and proof of delivery
6	Date you actually received the replacement	Your purchase settlement statement or DST confirmation
7	Whether the exchange was with a related party, directly or indirectly	Your own knowledge; ask your CPA if unsure

Line 5 and line 6 are where the deadlines show up. The instructions say replacement property "must be identified within 45 days after the property being given up" is transferred. They say the property "must be received by the earlier of" two dates. In plain terms, that means within 180 days or your tax return due date (with extensions) for the year of the sale, whichever comes first. A mismatch between these dates and your documents is a problem you want to catch before filing.

You fill out Part II only if line 7 is "Yes." A related party includes close family, such as your spouse, children, grandchildren, parents and siblings. It also includes certain corporations, partnerships, trusts and estates.

Line 8 asks for the related party's name, relationship, taxpayer number and address. Lines 9 and 10 ask whether either of you sold or disposed of the property within two years of the last transfer in the exchange. Line 11 lists three exceptions: a disposition after either party's death, certain involuntary conversions, and a showing that tax avoidance wasn't a principal purpose.

If a related party sells within two years and no exception applies, the deferred gain can become taxable. That's why the form follows you for two more years.

Part III: gain and basis (lines 12 to 25)

Part III is the math. It answers four questions: how much you gained, how much is taxed now, how much is deferred and what your basis is in the new property. My guide to realized vs. recognized gain explains the first two in depth. Here's the flow in plain English.

Lines 12 to 14 cover "other property" you gave up that isn't like-kind, such as cash or equipment thrown into the deal. Many real estate exchanges leave these blank.
Line 15 adds up the boot you received: cash, the value of other property you got, and "net liabilities assumed by other party." Net liabilities means the debt you were relieved of, minus debt you took on and cash you paid. Line 15 is then reduced, but not below zero, by exchange expenses.
Line 16 is the fair market value of the like-kind property you received. Fair market value, or FMV, is what a willing buyer would pay a willing seller.
Line 17 adds lines 15 and 16. Think of it as everything you got.
Line 18 is your adjusted basis in what you gave up, plus net amounts you paid the other party, plus exchange expenses not used on line 15. Think of it as everything you put in.
Line 19 is your realized gain: line 17 minus line 18.
Line 20 is the smaller of line 15 or line 19. This is the key idea of a 1031 exchange. You're taxed on your boot or your gain, whichever is less.
Lines 21 to 23 split the taxable gain. Line 21 is "ordinary income under recapture rules," and line 23 is your total recognized gain.
Line 24 is your deferred gain: line 19 minus line 23.
Line 25 is your basis in the new property. The form computes it by subtracting line 15 from the sum of lines 18 and 23. Lines 25a to 25c split that basis among types of property, in proportion to their fair market values.

The instructions say, "The amount on line 25 is your basis in the like-kind property you received in the exchange." That number drives your depreciation for years, and it drives your gain when you finally sell. Treat it as one of the most important numbers in your tax file.

More than one exchange in a year

If you did more than one exchange in a year, the instructions say "you can file a summary on one Form 8824 and attach your own statement" showing the details of each exchange. Ask your CPA which approach fits your situation.

Where the taxable part goes

Form 8824 doesn't stand alone. Any recognized gain flows to other forms. For capital assets, the instructions say to report the gain "according to the Schedule D (Form 1040) instructions." Gain on property used in a business generally goes to Form 4797. Your CPA will handle these links, but it helps to know that Form 8824 is the starting point.

When a QI fails

If your QI defaults and can't complete your exchange, the instructions say you "may be able to report the gain in the year or years payments are received," citing Revenue Procedure 2010-14. That's a narrow rule for a bad situation. It's one more reason to keep the exchange agreement and every statement from your QI.

Worked example: Form 8824 with simple numbers

This is a hypothetical example with round numbers. It doesn't describe any client, property or offering. It isn't tax advice, and your CPA should prepare your real form.

To keep the math readable, this example ignores closing costs. In a real exchange, exchange expenses first reduce line 15 (but not below zero), and any expenses not used there are added on line 18. Which closing costs count as exchange expenses is a question for your CPA.

The starting point

Say you own a rental building with an adjusted basis of $400,000. You sell it for $1,000,000. At closing, $300,000 pays off your loan, and the remaining $700,000 goes to your QI.

Version A: you replace everything

You buy a $1,000,000 replacement property. You use all $700,000 of exchange cash and take a new $300,000 loan. Nothing comes back to you.

Version B: you trade down a little

You buy a $900,000 replacement property. You use $650,000 of exchange cash and take a new $250,000 loan. After the exchange, the QI sends you the leftover $50,000.

How the lines come out

Form 8824 line	Version A	Version B
15: Cash received plus net liabilities assumed by the other party	$0	$100,000 ($50,000 cash + $50,000 of net debt relief)
16: FMV of like-kind property received	$1,000,000	$900,000
17: Lines 15 + 16	$1,000,000	$1,000,000
18: Adjusted basis given up	$400,000	$400,000
19: Realized gain (17 − 18)	$600,000	$600,000
20: Smaller of line 15 or line 19	$0	$100,000
23: Recognized gain (assume line 21 is $0)	$0	$100,000
24: Deferred gain (19 − 23)	$600,000	$500,000
25: Basis of property received (18 + 23 − 15)	$400,000	$400,000

What the example shows

In both versions, your realized gain is $600,000. That's your profit, whether you pay tax on it now or later.

In Version A, nothing is taxed now. The full $600,000 is deferred. Your new $1,000,000 building carries your old $400,000 basis.

In Version B, $100,000 is taxed now. Half is the $50,000 check. The other half is debt relief. You paid off a $300,000 loan and took on only $250,000 of new debt, and the $50,000 gap counts like cash you received. The other $500,000 of gain is deferred.

Notice the line 25 check. In Version B, the new building is worth $900,000, and $500,000 of gain is deferred into it. $900,000 minus $500,000 is $400,000, which matches line 25.

For the line 21 split, your CPA looks at the depreciation history of the property you gave up. That's another reason to keep your depreciation schedules. My guide to boot and partial exchanges goes deeper on which part of a taxable gain gets taxed first.

What is the napkin test for a 1031 exchange?

The "napkin test" is a quick industry rule of thumb used to check an exchange before running the full math. It's called that because you can do it on the back of a napkin. It isn't an IRS rule, and it doesn't replace Form 8824. It's a fast way to spot boot.

Ask three questions about your replacement property.

Is the price equal to or greater than the net sale price of what you sold?
Did you reinvest all of the net cash from the sale?
Is the new debt equal to or greater than the debt you paid off, or did you add your own cash to make up the difference?

If all three answers are yes, you've usually avoided boot. If any answer is no, expect some gain to be taxed, and ask your CPA to run the real numbers.

Here's the napkin test applied to the worked example above.

Napkin question	Version A	Version B
Price equal or up?	Yes: $1,000,000 vs. $1,000,000	No: $900,000 vs. $1,000,000
All net cash reinvested?	Yes: $700,000 of $700,000	No: $650,000 of $700,000
Debt replaced (or cash added)?	Yes: $300,000 vs. $300,000	No: $250,000 vs. $300,000
What Form 8824 shows	$0 recognized gain	$100,000 recognized gain

The napkin and the form agree. That's the point of the test: it gives you a quick warning before you sign a purchase contract.

One caution about the debt question. Adding your own cash can make up for less debt. But taking on more debt doesn't make up for cash you keep. If you pull cash out, it's still boot, even if the new loan is bigger. You can try your own numbers with my 1031 boot calculator.

How long should you keep 1031 exchange records?

Longer than most people think.

The IRS page on how long to keep records gives the general periods. Keep records "for 3 years" in the ordinary case. Keep them "for 6 years" if you don't report income you should report and it's more than 25% of the gross income on your return. Keep them "for 7 years" for certain loss claims.

For property, the rule is different. The IRS says to keep records "until the period of limitations expires for the year in which you dispose of the property." And for property received in a nontaxable exchange, it says "You must keep the records on the old property, as well as on the new property."

Here's what that means for an exchange. Your new property's basis comes from your old property. So the records for the old property stay relevant until you sell the new one in a taxable sale, and then for the period of limitations after that.

If you do a chain of exchanges, the chain of records grows. A rental bought in 2001, exchanged in 2014 and exchanged again in 2026 carries basis from all three. When you finally sell for cash, you may need records from 2001.

A records-keeping table

Document	Who usually provides it	When you get it	How long to keep it
Original purchase closing statement for the old property	Escrow or title company	When you first bought	Until the limitations period ends for the year you sell the last property in the chain
Depreciation schedules	Your CPA	Every tax year	Same as above
Sale contract with exchange clause	Your agent or attorney	Before the sale	Same as above
Exchange agreement and assignments	Your QI	Before closing	Same as above
Seller's settlement statement and Form 1099-S	Escrow, title or settlement agent	At and after closing	Same as above
Signed identification notice and proof of delivery	You and your QI	By day 45	Same as above
Buyer's settlement statement, deed, loan papers	Escrow, title, lender	At purchase	Same as above
PPM, subscription agreement, DST confirmation	The DST sponsor	At purchase	Same as above
QI's final accounting	Your QI	After the exchange	Same as above
Form 8824 and the full tax return	Your CPA	At filing	Same as above
State forms, such as FTB 3840	Your CPA	Each year required	Same as above, and for as long as the state requires

You'll notice the last column barely changes. That's the lesson. In an exchange, almost everything is a basis record, and basis records live as long as the property chain does.

How to store it

Keep one folder per exchange, paper or digital, with every document in date order. Scan paper documents and keep the scans somewhere backed up. Give your CPA a copy, and tell a family member or your estate attorney where the folder is. If questions about an earlier year come up later, the person handling them will need to find it.

Who is on your 1031 exchange team?

An exchange involves several parties, and each one produces some of the documents above. Knowing who does what keeps things from falling through the cracks.

Your CPA

Your CPA, or certified public accountant, runs the tax math before you list, reviews the settlement statements and prepares Form 8824. Your CPA also tracks your basis and depreciation over the years.

Bring your CPA in before you sign a sale contract, not in March. The most useful work happens early, when choices about price, debt and timing are still open.

Your attorney

A real estate or tax attorney reviews the sale contract, the purchase contract and the QI's exchange agreement. For complex cases, such as a partnership where partners want different things, an attorney structures the deal well before the sale.

Your real estate agent

Your agent or broker adds the exchange clause to the sale contract and helps keep the timeline realistic. On the buying side, an agent can help line up replacement property and backups before day 45.

Your QI

Your QI prepares the exchange agreement, the assignments and the notices. It holds the money, receives your identification and sends the final accounting.

Your escrow or title company

The escrow officer or title company closes both sides of the exchange. It prepares the settlement statements, records the deeds and usually files Form 1099-S.

Your lender

If you have a loan, your lender issues the payoff statement on the sale. If you take a new loan, the lender produces the loan documents on the purchase.

If you buy a DST interest, the sponsor provides the PPM, the subscription documents and the annual tax statements. A registered securities representative from a broker-dealer handles the investment side.

Why your CPA, attorney and agent can't hold the money

The IRS fact sheet says, "You can not act as your own facilitator." It adds that your agents can't either, including your real estate agent or broker, accountant or attorney. That also covers anyone who acted in those roles for you within the previous two years. The Form 8824 instructions put it simply: "Related parties and agents of the taxpayer aren't eligible to be QIs."

The team at a glance

Team member	Main documents they prepare	Can they be your QI?
CPA	Gain estimate, Form 8824, depreciation schedule	Generally no, if they've worked for you in the past two years
Attorney	Contract review, entity planning	Generally no, if they've worked for you in the past two years
Real estate agent	Sale contract with exchange clause	Generally no, if they've worked for you in the past two years
QI	Exchange agreement, assignments, notices, final accounting	Yes, that is its role
Escrow or title company	Settlement statements, deeds, Form 1099-S	Its role at closing is separate from the QI role
Lender	Payoff statement, new loan documents	Its lending role is separate from the QI role
DST sponsor	PPM, subscription documents, annual statements	Its sponsor role is separate from the QI role

Mistakes to avoid with 1031 exchange documents

These are common, and most are easy to prevent with a checklist.

Signing the exchange agreement after closing. Once the sale money reaches you, the exchange is over. The agreement and assignment must come first.
Skipping the notice of assignment. The buyer and the seller of your replacement must each get written notice. Keep the signed copies.
Identifying by phone or in conversation. The identification must be written, signed by you and delivered in time. A vague description, such as "a warehouse in Texas," isn't enough.
Not getting proof of delivery. A notice nobody can prove arrived by day 45 is a weak notice.
Changing the name on title. The same taxpayer must sell and buy. Check vesting before you sign the purchase contract.
Ignoring the settlement statement. Prorations and deposits paid from your proceeds can create boot. Have your CPA review the draft.
Losing the old basis records. Your new basis depends on your old one. Without the old records, your CPA can't prove it.
Filing Form 8824 in the wrong year. The form goes with the return for the year you gave up the relinquished property, even if you bought the replacement the next year.
Forgetting the two follow-up years. A related party exchange needs Form 8824 in each of the next two years.
Forgetting the extension. If your sale closed late in the year, your return due date can cut your exchange short. File the extension before the due date.
Assuming someone else has the file. Your QI, escrow company and CPA each keep some records, but none of them keeps the whole file for you. That job is yours.

Risks and limits

A well-kept file proves you followed the rules. It doesn't protect you from the other risks of an exchange.

Deadlines don't move. Outside of presidentially declared disasters, the 45-day and receipt deadlines can't be extended.
QI risk. Your money sits with the QI during the exchange. If a QI fails, your exchange can fail too.
Tax rules can be read differently. Treatment of some closing costs can vary among tax preparers. Your CPA's judgment matters.
Deferral isn't forgiveness. The deferred gain carries into the new property's basis and can come due when you sell for cash.
DST risks. If you buy a DST interest, you're buying a security. DSTs are illiquid, you have limited control, distributions are not guaranteed and you can lose your entire investment. Most are offered only to accredited investors.

What my data shows

Paperwork for a DST purchase depends on which offerings are actually available during your exchange. Here's what my offering records as of October 2026 show. The records cover 76 DST offerings from 38 sponsors. These figures describe the offerings I track. They aren't a forecast or a promise about any future offering.

Availability changes, so identify carefully

In my offering records as of October 2026, the status breakdown is the number I'd keep in mind during your 45 days: 16 open, 6 limited availability, 24 under review, 25 closed and 5 that I reviewed and passed on.

Status	Offerings
Open	16
Limited availability	6
Under review	24
Closed	25
Reviewed and passed on	5

A DST you identify can close to new money before you subscribe. That's why your identification notice should name real backups, and why the subscription paperwork should be ready early.

Minimums help with leftover cash

In my offering records as of October 2026, the median minimum investment is $100,000. Minimums range from $25,000 to $500,000, and 21 offerings (28%) start at $25,000.

That matters for the QI's final accounting. Money left over at the end of an exchange is generally boot. A smaller minimum can make it easier to place a remaining balance before your deadline.

Debt shows up on your settlement and DST paperwork

In my offering records as of October 2026, 36 of 76 offerings (47%) are all-cash, with no debt. 16 (21%) have a loan-to-value above 50%. Loan-to-value, or LTV, is the loan divided by the property's value. The median LTV among leveraged offerings is about 49%.

If you need to replace debt from your sale, the PPM shows your share of a DST's loan. Your CPA will want that number for the napkin test and for Form 8824.

Locations can mean state paperwork

In my offering records as of October 2026, offerings span 33 states. The most common are Florida (14), Texas (13), North Carolina (8) and Georgia (7). A DST that owns property in another state can bring state tax filings. Ask about them before you invest, and keep those returns with your exchange file.

How I help with the paperwork

I'm Jerry Baker, founder of Baker 1031 Investments, and you can read my background on the about page. When an exchange includes DST interests, my team and I coordinate the closing paperwork with the sponsor and your qualified intermediary.

If you're weighing DST interests for all or part of your replacement property, you can see the offerings I currently have available. Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. Baker 1031 Investments is independent of Aurora.

Frequently asked questions

What documents do I need for a 1031 exchange?

You need a sale contract with exchange language, a signed exchange agreement with your QI, assignment notices, both settlement statements, a signed identification notice and the QI's final accounting. You then file IRS Form 8824 with your tax return. A DST purchase adds a PPM, a subscription agreement and a confirmation.

When is Form 8824 due?

Form 8824 is filed with your tax return for the year you transferred the property you gave up. If you sold in one year and bought the next, it goes on the return for the year of the sale. If the exchange was with a related party, you also file it for the 2 years after.

Do I have to file Form 8824 if I owe no tax on the exchange?

Yes. The form reports the exchange itself, not just the tax. Even with zero recognized gain, it records your deferred gain and your new basis.

Who prepares Form 8824?

Usually your CPA or tax preparer completes it from your exchange documents. You supply the settlement statements, identification notice, QI accounting and basis records. You're still responsible for what's filed, so review it.

What is the napkin test in a 1031 exchange?

It's an industry rule of thumb, not an IRS rule, built on three questions: did you buy property worth at least your net sale price, reinvest all the net cash and replace the debt or add cash? If any answer is no, expect some taxable boot. Your CPA confirms the real result on Form 8824.

How long should I keep my 1031 exchange records?

The IRS says to keep property records until the period of limitations expires for the year you dispose of the property. After an exchange, you keep the records for the old property and the new one. In a chain of exchanges, that can mean keeping records for decades.

Does my real estate agent need to know I'm doing a 1031 exchange?

Yes. Your agent should add exchange language to the sale contract and help keep the timeline realistic. Your agent can't hold the money, though, because agents who've worked for you in the past two years can't be your QI.

Can I report more than one 1031 exchange on one Form 8824?

Yes, in some cases. The Form 8824 instructions say that if you did more than one exchange in a year, "you can file a summary on one Form 8824 and attach your own statement" showing the details of each exchange. Ask your CPA which approach fits your situation.

Do I need an attorney for a 1031 exchange?

It isn't required, but it's often wise. An attorney can review the QI's exchange agreement, both contracts and any entity issues. Partnerships and LLCs heading toward a sale usually need legal planning well ahead of time.

Is a Form 1099-S issued in a 1031 exchange?

The settlement agent generally files Form 1099-S for a real estate sale, including a sale that's part of an exchange. That gives the IRS a record of the sale. Form 8824 is how you explain the exchange on your return.

What does Form 8824 line 25 mean?

Line 25 is your basis in the replacement property. It generally equals your old basis, adjusted for boot, gain recognized and amounts you paid. It sets your future depreciation and your gain when you eventually sell.

Before you act

This guide is for education only. It isn't tax, legal or investment advice. Please confirm every decision with your CPA, attorney and qualified intermediary.

Sources

This guide is general education, not investment, tax, or legal advice, and not an offer to buy or sell securities. DST and other real estate securities are speculative and illiquid, distributions are not guaranteed, and you can lose your entire investment. Talk with your CPA, attorney, and qualified intermediary about your situation. Securities are offered through Aurora Securities, Inc., member FINRA/SIPC.

The short answer