What happens to my deferred taxes if I never sell the replacement property?
If you hold the replacement property until death, your heirs receive a stepped-up basis under IRC §1014, potentially eliminating all deferred capital gains permanently. This makes the 1031 exchange combined with a hold-until-death strategy one of the most powerful tax planning tools available. You defer taxes during your lifetime and your heirs inherit at current market value with no capital gains liability on the appreciation you deferred.
This article provides general educational information only. It is not legal, tax, financial, insurance, compliance, housing, brokerage, or professional advice. Rules, tax rates, obligations, enforcement practices, and market conditions vary by property, building, contract, municipality, and jurisdiction, and they change. Sellers should consult a qualified attorney, CPA, or other appropriate professional before making decisions based on their specific situation.
From the seller playbook: 1031 Exchange Strategy for Investment Property Sellers
This is general information, not legal, tax or accounting advice. Every situation is different. Talk to a licensed attorney, accountant or tax professional before you act.
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