Can We 1031 Into a New Building?

Top 50 Questions about Farmland

Yes, you can use a 1031 Tax-Deferred Exchange to reinvest proceeds from selling farmland into a new building or facility. This process, called an improvement exchange, allows you to defer taxes while transitioning your investment into structures like hog barns, cattle buildings, or shops.

How an Improvement Exchange Works

1. Eligible Projects:

   • Proceeds can be reinvested into a new building or facility instead of farmland.
   • Examples: Livestock barns, storage sheds, or machinery shops.

2. Key Rules:

   • 45-Day Identification Period: You must identify the property or project where funds will be reinvested.
   • 180-Day Completion Period: The building must be constructed and completed within 180 days of the sale.
   • Materials purchased but not installed do not qualify—construction must be fully finished by the deadline.

3. Timing is Critical:

   • Contractors, materials, and plans must be ready before you sell your property.
   • The building process should begin immediately after the sale to meet the 180-day requirement.

Key Takeaways

1. A 1031 Improvement Exchange allows you to reinvest proceeds into new structures instead of farmland.
2. The building must be completed within 180 days to qualify.
3. Advance preparation is essential for meeting the strict time limits.

For expert guidance and seamless execution of your 1031 exchange, contact David Whitaker – Iowa Land Guy today! David Whitaker | Iowa Land Guy