Dear John,
I’m not planning to sell until sometime in 2026, but I keep hearing that the end of this year is an important time to get things in order if I want to do a 1031 exchange.
Before the year wraps up, is there anything I should be doing now to make life easier (and the exchange smoother) when I’m ready to sell next year?
— Looking Ahead in Lexington
Dear Looking Ahead,
Great timing and I mean that literally.
December is one of the best months to get organized for a future 1031 exchange, because recordkeeping, “investment intent,” and certain IRS rules all tie back to the current year.
A lot of folks think the planning starts when they sign a contract to sell. In reality, the smoothest exchanges start months earlier with a little prep, some smart housekeeping, and a couple of quick conversations.
Here are the top things I tell investors to tackle before the ball drops:
→Make sure your property screams “investment,” not “vacation home.”
The IRS cares about intent to hold for investment.
If your property is a rental, business asset, or land held for appreciation, great! Just make sure your documentation reflects that.
If it’s a property you occasionally enjoy personally (looking at you, beach condos and lake houses), now’s the time to tighten that up and make sure your records show genuine investment activity.
→Get your documents in order before holiday brain sets in.
A little organization in December saves a lot of frustration next year.
Your future self (and your CPA) will thank you if you gather:
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- rental income & expense records
- improvement receipts
- depreciation schedules
- lease agreements
- original closing statement
- loan payoff details
If you’re missing any of these, December is the easiest time to track them down.
→Take a look at your depreciation.
Depreciation plays a big role in determining gain and tax exposure.
Before the year ends:
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- ask your CPA how much depreciation you’ve taken
- review your adjusted basis
- understand how depreciation recapture may factor into a 1031
It’s a quick conversation that gives you a much clearer picture of the road ahead.
→If you sold something earlier this year but didn’t exchange… review it.
It’s too late to defer tax on a past sale, but it’s not too late to:
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- understand the gain you’ll recognize
- review how the sale affects your overall strategy
- use the information to plan smarter for 2026
I see a lot of “Oh, I wish I’d done an exchange!” moments in December.
Let’s make sure we don’t repeat them next year.
→If you’re in or near an exchange already, double-check your timelines.
December is also a big month for:
- closed-but-not-identified exchanges
- identifying replacement property
- checking whether proceeds will be released in this year or next
- confirming whether installment sale rules might apply
If any of those apply to you, reach out to your QI and CPA. Timing matters here.
→Think through occupancy plans for replacement property.
This one surprises people.
If you’re planning to buy early next year:
- make sure you’re not planning to move in immediately
- watch out for “early occupancy” arrangements
- coordinate tenant plans on both ends
A premature move-in is one of the quickest ways to accidentally disqualify an exchange.
→Talk to your CPA and lender before everyone disappears for the holidays.
Your CPA can help you:
- calculate gain
- review depreciation
- confirm basis
- plan your 2026 strategy
Your lender can help you:
- map out debt replacement
- avoid unintentional boot
- lock in a timeline
A few quick calls now prevent a year of scrambling later.
→Sketch out a rough 2026 selling timeline.
This doesn’t have to be fancy, just think through:
- when you might sell
- seasonality in your market
- how long it may take to find replacement property
- loan timelines
- tax deadlines
A rough plan now = fewer surprises next year.
Think of December as your 1031 warm-up lap. You’re not racing yet, but you are getting everything lined up so that when it’s time to hit the gas next year, you’re set up for a smooth, successful exchange.
If you want help reviewing your situation or walking through a year-end checklist, give me a call anytime. I’m always happy to help someone get ahead of the curve.
— John Boyd
Founder & CEO, Banker Exchange
864.679.4793