Learn About The Tax Deferral Program That All The Smartest Landowners Are Using

In a recent Bid Caller Webinar, hosted by United Country Auction Services leaders, Jimmie Dean Coffey and Trina Turner, sat with Max Hansen, a nationally recognized 1031 exchange expert, attorney, Managing Director at Accruit and long-time advocate for landowners.

Hansen, who also served as President of the Federation of Exchange Accommodations (FEA), drew on his decades of experience to educate real estate professionals on how to help their clients defer capital gains taxes and strategically reinvest through like-kind exchanges. For United Country affiliates, he wanted to make his message clear: understanding 1031 exchanges is not something one should be thinking of as optional but rather a vital tool in today’s competitive and fast-moving market.

What Is A 1031 Exchange?

A 1031 exchange, part of Section 1031 of the IRS tax code, allows property owners to defer capital gains taxes when they sell investment property and reinvest the proceeds into another property of equal or greater value. This is not tax avoidance –it is tax deferral—and it has been part of the U.S. tax code since 1921.

However, following the 2017 Tax Cuts and Jobs Act, 1031 exchanges now apply only to real estate rather than personal property. That means these transactions must involve like-kind real estate, such as:

·        Farmland, ranchland and timberland

·        Recreational or hunting land

·        Vacant land or improved property

·        Conservation easements

·        Water, mineral and timber rights

·        Wind and solar energy sites

·        Billboard and cell tower locations

One important factor to remember – a personal residence does not qualify unless it is held for investment purposes and rented or used commercially for at least two years.

How Does A 1031 Exchange Work?

Under a traditional forward exchange, a property owner sells their investment property (relinquished property) and then has 180 days to close on the purchase of the replacement property. The most difficult aspect of this exchange is that they must identify that replacement property within 45 days of the sale.

Reverse exchanges are another option where the replacement property is purchased first and the relinquished property is sold afterward. This can provide more flexibility in competitive markets with limited inventory.  

An exchange type that is increasing in popularity is the improvement exchange, where proceeds are used to upgrade a new property before the final transaction is completed.

To qualify for a full tax deferral:

·        The replacement property must be of equal or greater value than the relinquished property.

·        Both equity and debt from the relinquished property must be replaced.

·        Any leftover funds or unbalance value is subject to taxation.

Tax Advantages Of A 1031 Exchange

One of the key benefits of a 1031 exchange is the ability to defer four types of taxation:

·        Depreciation recapture tax (25%)

·        Federal capital gains tax (15-20%)

·        State income taxes, where applicable (up to 13.3%)

·        Net Investment Income Tax (NIIT), if applicable

In total, this can result in significant tax savings and allow sellers to reinvest more capital into their next property. This can be especially valuable when facing rising property taxes or navigating complex terms for farmland and investment parcels.  

Why Do Landowners & Investors Use 1031 Exchanges?

Hansen emphasized that 1031 exchanges are particularly powerful in rural and land real estate, where many property owners and investors are looking to diversify their holdings, increase their income or preserve their legacy. These tools can serve as a strategic financial bridge between stewardship and opportunity, especially when land is inherited or sold to fund new ventures.

For example, sellers can:

·        Auction off multiple parcels of land

·        Reinvest proceeds into agricultural land or income-producing properties

·        Leverage conservation easements to both preserve wildlife habitats and maintain tax advantages

Conservation easements, legal requirements that limit land use to protect environmental values, do qualify as real property in many exchange scenarios. When paired with agricultural exemptions or sold under flexible terms, these options become even more attractive.

Why Should Brokers & Auctioneers Understand 1031 Exchanges?

For brokers, auctioneers and other real estate professionals, a deep understanding of how 1031 exchanges work can dramatically increase expertise and authority. The competitive edge that leveraging this tax deferral adds will attract more clients and grow a business.

Hansen outlined several reasons why real estate professionals should be fluent in 1031 strategies and how it can improve sales:

·        Exchangers are often cash buyers

·        They operate on strict times, increasing urgency

·        They tend to own multiple properties, generating multiple deals

·        They are often experienced investors, not first-time or emotional buyers

·        Each sale can turn into multiple purchases

Overall, having the knowledge and experience with 1031 exchanges positions brokers, agents, REALTORS® and auctioneers as trusted advisors and problem solvers who know all the tricks of the trade.

Supporting Rural Americans Through Smart Tax Strategy

Beyond the tax benefits, Hansen asserted how 1031 exchanges play a critical role in sustaining rural communities, preserving working land and encouraging economic reinvestment in agricultural and country lifestyle-based regions.

From deferring tax burdens to investment diversification, these exchanges offer a path for landowners to contribute to long-term land stewardship while growing their generational wealth.

Ongoing Advocacy & Education

As a Certified Exchange Specialist®, paired with his experience with the FEA, Hansen continues to work on behalf of landowners and real estate professionals in Washington D.C. He regularly engages with lawmakers across the political spectrum to ensure the continued availability and integrity of 1031 exchanges.

His work reminds us that tax policy is not about numbers –it is about people, land and the future of American agricultural and rural development.

Why Do 1031 Exchanges Matter?

1031 exchanges have been part of the U.S. tax code for more than a century, but their relevance is more important than ever. Whether it is a family selling farmland, a rancher reinvesting in income-generating land or an investor rolling proceeds into wind farms or timber tracts, the opportunity to defer taxes and grow wealth through like-kind real estate is too powerful to ignore.

Watch the whole seminar hosted by United Country Real Estate to dive even deeper in this complex yet critical exchange program. Contact an office near you to begin your journey to affordable and exciting real estate and discover the United Country difference.