1031 Exchange Tennessee: The 45- and 180-Day Rules for Rental Investors

A 1031 exchange lets an investor who sells one piece of investment real estate and buys another put off paying tax on the gain, as long as the deal follows a strict set of federal rules. For Tennessee investors trading up from a single rental to a small portfolio, or from one market to another, the deadlines in those rules usually shape the financing timeline as much as the tax plan does.

The rules come from Section 1031 of the Internal Revenue Code. This guide summarizes how the Internal Revenue Service describes them. It is general information, not tax or legal advice. Investors should talk with a tax professional and a qualified intermediary about any specific sale before listing a property.

What property qualifies for a 1031 exchange?

For 2018 and later years, the IRS says like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment, other than real property held primarily for sale. In practice, that means a long-term rental house, a small multifamily building or commercial property can qualify, while a home bought to renovate and resell quickly generally does not, because it is held primarily for sale.

IRS Publication 544 also lists real property used for personal purposes, such as a home, among the property the like-kind rules do not cover. A dwelling unit such as a vacation home may qualify only if certain IRS requirements are met. Real properties are generally like-kind to each other, whether improved or unimproved, according to the IRS: an apartment building would generally be like-kind to unimproved land, for example. Real property in the United States is not like-kind to real property outside it.

The 45-day and 180-day deadlines

Most investor exchanges are deferred exchanges: the old property sells first, and the replacement closes later. The IRS sets two clocks that start on the day the relinquished property is transferred.

Requirement	IRS rule
Identify replacement property	In writing, within 45 days after the property given up is transferred
How to describe it	Clearly, such as by legal description, street address or a distinguishable name
Receive replacement property	By the 180th day after the transfer or the due date of the tax return (including extensions), whichever is earlier
Reporting	File Form 8824 with the tax return for the year the property given up was transferred

Source: IRS, Instructions for Form 8824 (2025).

The deadlines are strict. The IRS can postpone them for taxpayers affected by a federally declared disaster, but only when it announces relief for that specific disaster, under Revenue Procedure 2018-58. The sale proceeds matter too: according to IRS Publication 544, if an investor actually or constructively receives the money before receiving the replacement property, the transaction can be treated as a sale rather than an exchange, or as a partially taxable exchange. A qualified intermediary is one of the safe-harbor arrangements the IRS describes for holding the proceeds; the Form 8824 instructions note that if the timing requirements are missed because of the intermediary, the transaction still won't qualify as a deferred exchange.

How financing fits into the exchange timeline

Because the replacement property must close within the 180-day window, the loan on that property needs to be ready in time. Investors buying a rental often look at a debt service coverage ratio (DSCR) loan, which is underwritten mainly on whether the property's rent covers its debt service rather than on personal income. Iron Hill Brief's guide to the DSCR loan in Tennessee explains that calculation, and the DSCR calculator can help test a property before it is identified.

Starting the financing conversation before the relinquished property closes gives an investor more of the 45-day identification period to compare properties, rather than spending it on paperwork. Overview details on DSCR loans cover the property types and documentation involved. Requirements vary by lender and property, and any cash or other non-like-kind property received at the end of an exchange may be taxable, according to the IRS.

Frequently asked questions

Can I do a 1031 exchange on a fix-and-flip property? Generally not. The IRS excludes real property held primarily for sale, which usually describes a home bought to renovate and resell. A tax adviser can review how a specific property was held.

Can I move into the replacement property? The IRS says real property used for personal purposes, such as a home, is not covered by the like-kind rules. An investor planning to live in a property should discuss the timing and use with a tax adviser before the exchange.

Does Tennessee have its own 1031 exchange rules? This guide covers the federal rules described by the IRS. State tax treatment can differ by state, so investors should ask a tax adviser how the sale is treated where each property is located.

Working on a Tennessee rental? Talk with an Iron Hill loan advisor: text Ashley at 615-949-4780 or book a time here. Iron Hill Mortgage | NMLS #1946451.

Business-purpose loans for investment property only. Not for personal, family or household use. Subject to approval. Equal Housing Opportunity.

Sources

• Internal Revenue Service, Instructions for Form 8824 (2025), Like-Kind Exchanges: https://www.irs.gov/instructions/i8824
• Internal Revenue Service, Publication 544 (2025), Sales and Other Dispositions of Assets (personal-use property, dwelling units, receipt of proceeds, qualified intermediaries): https://www.irs.gov/publications/p544
• Internal Revenue Service, IR-2018-227, "Like-kind exchanges now limited to real property" (Nov. 19, 2018): https://www.irs.gov/newsroom/like-kind-exchanges-now-limited-to-real-property
• Internal Revenue Service, Revenue Procedure 2018-58 (disaster postponement of the 45-day and 180-day periods, section 17): https://www.irs.gov/pub/irs-drop/rp-18-58.pdf