Last updated: November 2026
A 1031 exchange lets you defer capital gains tax when you sell investment or business real estate and buy other like-kind real estate. You must use a qualified intermediary, identify replacement property within 45 days of selling, and close within 180 days. Property for personal use doesn't qualify, and the rules are strict.
If you're selling one investment property and buying another, including on the Grand Strand, a 1031 exchange can keep more of your money working. Here's the outline.
This guide is part of our guide to buying or leasing commercial property in Myrtle Beach.
In this guide:
- What is a 1031 exchange?
- What property qualifies?
- What are the 45-day and 180-day deadlines?
- What does a qualified intermediary do?
- What is boot?
- What should you think about when buying the replacement property?
- What are common 1031 mistakes?
- Who should be on your 1031 team?
- What terms should you know?
- Are there South Carolina considerations?
- What else do people ask about this?
- Ready to talk about commercial space on the Grand Strand?
What is a 1031 exchange?
It's a tax-deferral tool under Section 1031 of the Internal Revenue Code. According to the IRS, when you exchange real property held for business or investment for other like-kind real property, you can defer recognizing gain. The gain isn't forgiven. It carries over into the new property.
Since 2018, Section 1031 applies only to real property, not personal property like equipment or vehicles.
What property qualifies?
Both properties must be held for investment or for use in a trade or business. Like-kind is broad for real estate. For example, a rental house can generally be exchanged for a commercial building or land, as long as both are held for investment or business use.
Your personal residence and property held mainly for resale, like a flip, don't qualify. Vacation homes have their own limits. Ask your tax advisor.
What are the 45-day and 180-day deadlines?
The deadlines are strict and generally can't be extended. The IRS says you must identify potential replacement property in writing within 45 days of transferring the property you sold, and you must receive the replacement property within 180 days of the sale, or by your tax return due date including extensions, if that's earlier.
Line up replacement options before you sell. On a busy market, 45 days goes quickly.
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What does a qualified intermediary do?
A qualified intermediary holds the sale proceeds so you never receive them. If you take control of the cash, even briefly, the exchange can fail. The intermediary is usually set up before the sale closes, and the exchange documents become part of both closings.
Choose an intermediary carefully. Ask your CPA or attorney for guidance.
What is boot?
Boot is anything you receive that isn't like-kind property, and it can be taxable. That can include cash left over after the purchase, or a reduction in debt if your new loan is smaller than the old one. To defer all the gain, investors usually buy property of equal or greater value and replace the debt.
Your tax advisor can run the numbers for your situation.
What should you think about when buying the replacement property?
Don't let the deadline push you into a bad property. Do the same diligence you'd do for any purchase: check the cap rate, the leases, inspections and environmental. See what a cap rate is and due diligence.
Make sure your purchase timeline fits the 180-day limit, including financing.
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What are common 1031 mistakes?
Most failed exchanges come down to timing or control of the money. Common problems include not setting up a qualified intermediary before the sale closes, missing the 45-day identification deadline, identifying properties that fall through with no backup, receiving sale proceeds directly and buying property that doesn't qualify.
Another is focusing only on the tax deferral. A replacement property with weak tenants or a poor location can cost more than the taxes you deferred. Plan your search early, and identify backup options within the IRS rules.
Who should be on your 1031 team?
A 1031 exchange involves several people. Most investors work with a CPA or tax advisor, a qualified intermediary, a real estate attorney, a lender if financing is involved, and an agent on both the sale and the purchase. Bring them together before you list the property you're selling, so the exchange is set up correctly and your search for a replacement can start early.
What terms should you know?
- Relinquished property: The property you sell in the exchange.
- Replacement property: The property you buy in the exchange.
- Qualified intermediary: The independent party that holds the sale proceeds and handles the exchange documents.
- Boot: Cash or other non-like-kind value you receive, which can be taxable.
- Like-kind: For real estate, property held for investment or business use, which is broadly interchangeable under Section 1031.
Are there South Carolina considerations?
South Carolina generally follows federal tax treatment, but state rules can differ. If you're selling property in another state or moving to South Carolina, ask your CPA how each state treats the exchange and any withholding at closing.
Related guides:
- What's a Cap Rate, and How Do Investors Use It in Myrtle Beach?
- What Is Due Diligence on a Commercial Property, and How Long Should I Ask For in Myrtle Beach?
- How Is Financing Commercial Property Different From a Home Loan (SBA 504 and 7(a))?
- How Do I Buy or Lease Commercial Property in Myrtle Beach?
What else do people ask about this?
Can I do a 1031 exchange on my home?
No. Your personal residence doesn't qualify. Section 1031 applies to property held for investment or business use.
How long do I have to find a replacement property?
You must identify it in writing within 45 days and receive it within 180 days of selling (or by your tax return due date, with extensions, if earlier), per the IRS.
Can I exchange a rental house for a commercial building?
Generally yes, since both are real property held for investment or business. Confirm with your tax advisor.
Do I need a qualified intermediary?
For a standard delayed exchange, yes. If you receive the sale proceeds, the exchange can fail.
Does a 1031 exchange eliminate taxes?
No. It defers them. The gain carries over to the replacement property.
This article is general information, not legal, tax or financial advice. Rules and requirements change. Talk to a South Carolina attorney, CPA or lender about your situation, and confirm current requirements with the agency involved.
Ready to talk about commercial space on the Grand Strand?
Whether you are leasing your first space, buying a building for your business or adding an investment property, a short call with our team can help you sort out the options and the next steps. No pressure, and no commitment.