1031 Like-Kind Exchange Attorney & CPA — Orland Park and Chicago Southwest Suburbs

A Section 1031 like-kind exchange allows real estate investors to defer capital gains tax when selling investment or business property — provided the proceeds are reinvested in a qualifying replacement property following strict IRS rules.

Done correctly, a 1031 exchange can preserve capital that would otherwise be paid to the IRS, allowing you to leverage the full equity in your property into a larger or higher-performing replacement asset. Done incorrectly — even by one day or one missed step — the entire transaction becomes taxable.

As both a licensed Attorney and Certified Public Accountant serving Orland Park, Tinley Park, Orland Hills, and the Chicago southwest suburbs, Paul Lechner provides the legal documentation, tax analysis, and strategic guidance to execute a 1031 exchange correctly from the first step to the last.

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How a 1031 Exchange Works

Under IRC Section 1031, gain from the sale of investment or business real property is deferred — not eliminated — if the proceeds are used to acquire a like-kind replacement property. The key requirements are:

Like-Kind Property

Both the relinquished property (what you sell) and the replacement property (what you buy) must be held for investment or productive use in a trade or business. Residential personal-use property does not qualify. Almost any type of real estate qualifies as like-kind to any other — a rental house can be exchanged for a commercial building, a farm for an apartment complex, or vacant land for a shopping center.

The 45-Day Identification Rule

From the date you close on the sale of the relinquished property, you have exactly 45 calendar days to identify in writing the potential replacement properties. You may identify up to three properties of any value (the Three-Property Rule), or any number of properties whose combined fair market value does not exceed 200% of the value of the relinquished property (the 200% Rule). Missing this deadline disqualifies the entire exchange.

The 180-Day Exchange Period

You must close on the replacement property within 180 calendar days of the sale of the relinquished property — or by the due date of your tax return for the year of the sale (including extensions), whichever comes first. If you miss this deadline, the deferred gain becomes immediately taxable.

Qualified Intermediary Requirement

You cannot receive the sale proceeds yourself, even briefly. A Qualified Intermediary (QI) — an independent third party — must hold the proceeds from the sale of the relinquished property and use them to fund the acquisition of the replacement property. If proceeds touch your hands or your agent's hands, the exchange fails. We coordinate with qualified intermediaries and review QI agreements to protect your interests.

Equal or Greater Value

To defer all capital gain, the replacement property must be of equal or greater value than the relinquished property, and all of the equity must be reinvested. If you receive cash or take on less debt in the replacement property, that amount — called "boot" — is taxable in the year of the exchange.

Advanced 1031 Strategies

Reverse Exchanges

In a reverse exchange, you acquire the replacement property before selling the relinquished property. This is useful when you have found the right replacement property but have not yet sold your existing investment. Reverse exchanges require an Exchange Accommodation Titleholder (EAT) to hold title and must be completed within 180 days. They are more complex and expensive than forward exchanges but can be the right tool when timing demands it.

Build-to-Suit (Improvement) Exchanges

If the identified replacement property requires significant renovation or construction to meet your investment goals, a build-to-suit exchange allows exchange proceeds to be used for improvements to the replacement property — provided all construction is completed and funds are spent within the 180-day exchange period.

Delaware Statutory Trusts (DSTs)

A Delaware Statutory Trust allows investors to acquire a fractional beneficial interest in institutional-grade real estate — medical office buildings, apartment complexes, industrial facilities — as their 1031 replacement property. DSTs satisfy the like-kind requirement and can be an effective solution when it is difficult to identify suitable replacement properties within the 45-day window, or when the investor wants to diversify into multiple asset types.

Combining 1031 with Estate Planning

One of the most powerful long-term strategies involves holding exchanged property until death. At death, the basis of appreciated property steps up to fair market value, eliminating the deferred gain entirely for the heirs. When coordinated with a revocable living trust or other estate plan, this strategy can result in the complete elimination of capital gains tax accumulated across multiple exchanges over a lifetime of investing.

Why the Attorney-CPA Combination Matters for 1031 Exchanges

A 1031 exchange requires both legal documentation and tax analysis. The transaction documents — the exchange agreement, qualified intermediary agreement, and property contracts — must be drafted to satisfy IRS requirements. The tax analysis must model the deferred gain, the basis of the replacement property, depreciation recapture, and the effect of boot on current-year taxes.

An attorney who is also a CPA can handle both sides of this equation. Paul Lechner holds a Juris Doctor, Master of Laws in Taxation (LL.M.), and is a licensed CPA with extensive experience in real estate and equipment leasing transactions. He has structured and closed complex financing and investment transactions over a career spanning KPMG, GE Capital, and private practice.

Related Services

• Real Estate Attorney Services — closings, title, contract review, and investment analysis
• Tax and Financial Planning — capital gains planning, depreciation strategies, and IRS matters
• Estate Planning — coordinating appreciated real estate with your estate plan and basis step-up strategy

For more information contact Paul Lechner, Esq., CPA at (708) 460-6686 or schedule a consultation online.