Eyeing a brand-new condo or townhome in Palm Beach County and wondering if you can use a 1031 exchange to get there? You are not alone. Investors love the idea of deferring taxes while upgrading into fresh construction, but the timelines can be tough. In this guide, you will learn the key 1031 rules, how they interact with new builds, the structures that can help you stay compliant, and the local closing realities that can make or break your deal. Let’s dive in.
1031 exchange basics
What qualifies
A 1031 exchange lets you defer capital gains tax when you sell investment or business real estate and buy like-kind real estate that you also hold for investment or business use. Personal residences do not qualify. Your replacement property must be real property, and the entire exchange must follow strict rules.
The 45/180 day clock
Once you transfer your relinquished property, the clocks start:
- 45 days to identify your potential replacement properties.
- 180 days to acquire the replacement property (or your tax return due date, if earlier).
These deadlines are firm. Missing either deadline usually disqualifies the exchange.
Identification rules
You must identify in writing, unambiguously, within 45 days.
- 3‑property rule: Identify up to three properties of any value.
- 200% rule: Identify any number of properties as long as the total value does not exceed 200% of the value of what you sold.
- 95% rule: If you go beyond those limits, you must acquire at least 95% of the total value you identified.
New builds: why timing is tricky
New construction often runs on the developer’s timeline, not yours. Even if you sign a contract today, the closing may depend on the certificate of occupancy, HOA turnover, or condo documents being recorded. Those milestones can push beyond the 180‑day window. Many pre‑construction contracts also limit assignment, which matters if your exchange structure needs to assign the contract or use a third party to hold title.
If the unit is already complete or will close within 180 days, a standard exchange can work. If delivery is scheduled after 180 days, you will need a different structure or a strong backup plan.
Three structures that work
Forward (standard) exchange
This is the most straightforward approach. You sell your relinquished property, your qualified intermediary (QI) holds the funds, and you close on a replacement within the 45/180 timelines. It works best when the new unit is completed and ready to convey title within 180 days. The risk is simple: if the developer delays past 180 days, your exchange fails.
Reverse exchange (EAT/parking)
A reverse exchange flips the sequence. An Exchange Accommodation Titleholder (EAT) acquires and holds title to the replacement property (or land) before you sell your relinquished property. Once your sale occurs, you can receive title from the EAT within the 180‑day period. This can help when the developer can convey to an EAT earlier than to you or when you need to secure the property before your sale closes. Expect higher fees, more complexity, and lender scrutiny. Not every developer will allow an EAT to hold title.
Improvement (build‑to‑suit) exchange
Here, the EAT takes title and oversees improvements before you receive the property. This is useful if your desired unit or build will not be finished in time. It is complex and requires careful coordination on construction contracts, insurance, title, and lender terms. Fees and risk are higher, and fewer providers offer this structure. You will need a QI and tax counsel.
Identification strategies that protect you
- Use backups. Under the 3‑property or 200% rules, identify completed or nearly completed units that can close within 180 days. Pre‑construction targets can be listed alongside ready-to-close backups.
- Be specific. Identify by legal description when possible. If you must identify a contract, list the seller, project name, unit or lot number, address, and contract date. State clearly if you plan to acquire via assignment or through an EAT.
- Plan for assignment. If acquisition depends on an assignment, make sure the contract allows it and that the developer will consent in writing.
- Document contingencies. Tell your QI in writing if an EAT or assignment is part of the plan. Keep instructions precise and timely.
Palm Beach County closing realities
Developer and condo timing
Palm Beach County is active with both resales and new developments. Resale closings often run 30 to 60 days. Developer closings depend on certificate of occupancy, recording of condominium documents under Florida’s Condominium Law, and HOA readiness. If the CO or documents slip, your closing date may move with them.
Title and underwriting
Title companies in the county commonly handle exchanges, but policies vary. Some underwriters will not insure an EAT’s title until certain developer requirements are met. New projects may have easements or incomplete documents that delay title clearance. Build in time to cure these items before the QI can release funds.
HOA estoppels and fees
Developers often deliver estoppel letters late in the process. Clarify timelines and be ready for last‑minute adjustments. Confirm reserves, master insurance details, and any master association documents well before your 180‑day deadline.
Remote signings and eRecording
Florida allows remote online notarization, and many Palm Beach County offices accept eRecording. However, some developers and lenders will not accept remote signings for developer closings. Verify early to avoid a last‑minute scramble.
Lender coordination
Some lenders will not lend into an EAT structure or have special underwriting for reverse or improvement exchanges. If you plan to finance, involve the lender early. Construction, takeout, and permanent loans may require special covenants when an EAT is on title.
Pitfalls to avoid
- Missing 45/180 deadlines. This is the most common failure point and usually eliminates 1031 treatment.
- Non‑assignable contracts. If you need to use an assignment or an EAT and the contract prohibits it, your structure may be unworkable.
- Title insurance gaps. If the underwriter will not insure EAT ownership or open issues remain, the QI may not release funds, blocking closing.
- Mortgage boot. If your replacement loan amount is lower than the debt on what you sold, the difference can be taxable boot. Model debt replacement with your tax advisor.
- Depreciation timing. For a newly completed rental, depreciation begins when it is ready and available for rent. That placed‑in‑service date affects your first‑year deductions.
- Local transfer costs. Florida has no state income tax, but local documentary stamp and transfer taxes apply. Coordinate with your title company for accurate estimates.
Step‑by‑step game plan
Early planning
- Engage a QI with reverse and improvement exchange experience in Palm Beach County.
- Consult a tax advisor and a real estate attorney, and involve your lender early.
- Review the developer’s contract for assignment rights, CO triggers, and HOA requirements.
Structure selection
- Decide on forward, reverse, or improvement exchange based on delivery timing and developer flexibility.
- If using an EAT, confirm the developer will convey to the EAT and that title insurance is available.
Identification period (first 45 days)
- Submit specific written identifications to your QI.
- Mix pre‑construction targets with completed backups that can close within 180 days.
- State clearly if an EAT or assignment will be used.
Closing coordination (by day 180)
- Work with the title company and QI to clear all conditions early.
- Confirm CO issuance, recording of condo documents, HOA turnover items, and estoppels will be ready in time.
- Obtain lender consent for any EAT or reverse structure.
Post‑closing
- Record and retain complete files for your tax return filing (Form 8824) and ongoing depreciation.
Real‑world examples
Example A: forward exchange success
You sell a rental condo in Palm Beach County on April 1. The 45‑ and 180‑day clocks begin on April 2. You identify three completed units and close on one on June 15. Title transfers within 180 days, so the exchange qualifies.
Example B: delivery beyond 180 days
You want a pre‑construction unit, but the developer’s timeline is nine months. A standard exchange would miss the 180‑day limit. You use a reverse exchange where an EAT takes title when allowed. After your sale, you receive title within the 180‑day window.
How to think about contracts
Identifying a purchase contract or option can work if your identification is specific and you still close within 180 days. In practice, pre‑construction contracts often close only after the CO or condo recording, which may be too late. Unless the developer allows early closing or assignment that fits the timeline, you will likely need a reverse or improvement structure.
Local coordination checklist
- Confirm municipal CO timing for West Palm Beach, Boca Raton, Palm Beach Gardens, Jupiter, or your specific city.
- Verify developer readiness on condo declarations, bylaws, and master insurance.
- Ensure the title underwriter will insure EAT ownership if applicable.
- Use strict wire‑fraud protocols and verify all wiring instructions by phone.
- Align lender underwriting with your exchange structure well before closing.
Final thoughts
A 1031 exchange into a new build in Palm Beach County is possible, but it demands early planning, precise identification, and local coordination. The right structure can bridge timing gaps, and good backups can save your exchange if the developer slips. If you want a calm, senior‑level approach to navigating these moving pieces, reach out to IJL Real Estate Group to map your plan and coordinate your team.
Ready to start? Book an Appointment with IJL Real Estate Group for a tailored, step‑by‑step plan that fits your timeline and target property.
FAQs
What is a 1031 exchange for new construction?
- It is a tax‑deferred swap of investment real estate into a newly built property, as long as you meet like‑kind rules, identify within 45 days, and close within 180 days.
Can I use a standard 1031 for pre‑construction in Palm Beach County?
- Yes, only if the developer can convey title within 180 days; otherwise consider a reverse or improvement exchange or choose a completed backup.
What is an EAT in a reverse exchange?
- An Exchange Accommodation Titleholder is a third party that temporarily holds title to your replacement property so you can meet 1031 timelines.
Do condo contracts usually allow assignment to an EAT?
- Many do not or require developer consent; always review the contract early and secure written permission if your structure needs an assignment.
How do HOA and CO timelines affect my 1031 closing?
- If a certificate of occupancy, condo document recording, or HOA items are delayed past 180 days, your standard exchange can fail; plan backups or use an alternative structure.
Will financing be harder with a reverse or improvement exchange?
- Some lenders are fine while others are cautious; involve your lender early and confirm underwriting requirements for EAT ownership.