Can I do a 1031 exchange on a property I already bought?

Ownership is the disqualifier, and the date you decided to exchange does not change it

The regulation defines a deferred exchange as one in which you transfer the relinquished property and then receive the replacement property (Reg. §1.1031(k)-1(a)). It goes further and rules out the reverse sequence by analogy: 'a sale of property followed by a purchase of property of a like kind does not qualify for nonrecognition of gain or loss under section 1031.'

A purchase followed by a sale is the same problem with the halves swapped. Two separate transactions in which you pay cash for one property and receive cash for another are not an exchange of property for property, whatever your intention was at the time.

Intent recorded after the fact does not help either. Rev. Proc. 2000-37 requires your bona fide exchange intent to exist at the moment ownership passes to the accommodation titleholder, which is a moment that has already gone by in your case.

The 180-day look-back in Rev. Proc. 2004-51 closes the parking workaround

The workaround people ask about is to deed the property you just bought to an exchange accommodation titleholder, sell the old property, and have the titleholder deed the new property back as replacement property. Treasury named that transaction and killed it.

Rev. Proc. 2004-51 records the problem in its background: the Service became aware that 'some taxpayers have interpreted this language to permit a taxpayer to treat as a like-kind exchange a transaction in which the taxpayer transfers property to an exchange accommodation titleholder and receives that same property as replacement property in a purported exchange for other property of the taxpayer.'

The fix is section 4.03, which added a limitation paragraph to Rev. Proc. 2000-37 denying the safe harbor to property the taxpayer owned within the 180-day period ending on the day it reaches the titleholder. The change is effective for transfers of qualified indicia of ownership on or after July 20, 2004.

Waiting out the 180 days does not resurrect the deal, because the statute still needs an exchange

A safe harbor is a promise not to challenge, not a grant of treatment. Rev. Proc. 2004-51 says so directly: 'Rev. Proc. 2000-37 does not abrogate the statutory requirement of § 1031 that the transaction be an exchange of like-kind properties.'

The authorities it cites are about exactly this pattern. An exchange of real estate owned by a taxpayer for improvements on land owned by that same taxpayer fails §1031, per DeCleene v. Commissioner, 115 T.C. 457 (2000) and Bloomington Coca-Cola Bottling Co. v. Commissioner, 189 F.2d 14 (7th Cir. 1951); Rev. Rul. 67-255 holds a building constructed on a taxpayer's own land is not of like kind to that taxpayer's converted land.

Treasury left one narrow door ajar and has not walked through it. Section 2.06 says the Service and Treasury 'are continuing to study parking transactions, including transactions in which a person related to the taxpayer transfers a leasehold in land to an accommodation party' that then improves the land. A structure built on an open study item is a structure your own counsel has to underwrite; see can I use 1031 money to build on land I already own.

Worked hypothetical: land bought in January, rental sold in June

Round numbers, hypothetical. In January you pay $400,000 cash for a commercial lot. In June you agree to sell a rental with a $700,000 price and a $250,000 adjusted basis, and you would like the lot to absorb the gain.

It cannot. The lot is yours, so it is not available as replacement property, and the June sale is simply a taxable sale of the rental with roughly $450,000 of realized gain to report.

What still works is redirecting the June sale into a different replacement. Open the exchange before that closing, identify property you do not own within 45 days, and close within 180 days. The lot is untouched by any of it and keeps its $400,000 basis.

What is actually available once you have already taken title

Confirm each of these with your CPA or attorney before you act, because the right answer depends on your basis, your debt and your entity structure.

• Exchange the old property into something else you do not own: a different property, a DST interest or a direct-title security
• Pull equity out of the property you just bought with a separate loan rather than with exchange funds; refinancing before or after a 1031 explains the timing traps
• Do not try to pay down the new property's mortgage with exchange proceeds; see can I use exchange proceeds to pay down a mortgage on a property I already own
• Treat the recent purchase as a future relinquished property instead, subject to holding and intent; see how long must I hold a rental before I can 1031 exchange it
• If the old sale will not wait, price a failed exchange honestly against a partial one; see what happens when a 1031 exchange fails

Sequencing the next one so the parking structure holds

If the point is that you found the replacement before you found a buyer, the order is the whole answer. The accommodation titleholder must acquire the property; you must never be on title first.

• The titleholder takes qualified indicia of ownership, which may be legal title, contract-for-deed style ownership, or interests in a disregarded single-member LLC that holds title
• A written qualified exchange accommodation agreement follows within five business days, and both sides must report the property consistently
• You identify the relinquished property in writing within 45 days of the titleholder's acquisition, using the alternative-and-multiple rules of Reg. §1.1031(k)-1(c)(4)
• Everything unwinds within 180 days, which is also the ceiling on the combined parking period
• You may guarantee the titleholder's debt, lend it the purchase money, manage the property and lease it back without breaking the arrangement