1033 Exchange Calculator

When the government takes your property, or you sell it because the government is about to, the tax on your gain can be put off if you buy replacement property in time. Here is how it works:

1. It has to be a forced sale. Your property was taken by eminent domain, or you sold it under a real threat of condemnation.

2. You get years, not days. Business or investment real estate gets until the end of the third tax year after the year you first realize gain. There is no 45-day list and no 180-day deadline.

3. You can hold the money yourself. No qualified intermediary is needed.

4. Replace at least your net award. To put off all of the tax, your replacement must cost at least your award less what you paid to get it.

5. Debt can stand in for cash. The debt that comes with your replacement counts toward its cost, so new debt can take the place of cash from the award. In a 1031 exchange, new debt cannot replace cash.

6. Like-kind real estate works. For business or investment real estate, any like-kind real estate can be the replacement, including a DST structured for it.

Example: the city takes a building Tom has owned for years and pays him $2,000,000. His adjusted basis is $600,000, so his gain is $1,400,000. If his replacement DSTs cost at least $2,000,000, counting their debt, all $1,400,000 of that gain may be put off.

Answer the two questions, then enter the date the property was taken or sold. Your replacement deadline appears in the green box right away. Then enter boxes 2 to 5: the total award, any loan paid off, what you paid for the property and the depreciation allowed on it. The other boxes are optional or already filled.

Add the DSTs you are considering on the right, and the green box shows how much of your gain may be taxable.

When real estate held for business or investment is taken by eminent domain, or sold under threat of it, the replacement only has to be like-kind real estate, the same standard as a 1031 exchange. An interest in a DST structured to meet IRS Revenue Ruling 2004-86 is treated as an interest in real estate, so it can be used.

Property you did not hold for business or investment, such as your home, must be replaced with property similar or related in service or use, such as another home. A DST does not meet that test. Property lost to fire, storm or theft follows the same narrower test, and a DST does not meet it in most cases.

It opens on the earlier of the date you were first threatened with condemnation or the date the property was taken. It closes three years after the end of the first tax year in which you realize any gain — usually the year you are paid more than your adjusted basis. Property you did not hold for business or investment gets two years instead of three.

Example: the city tells you in March 2026 that it will take your building. It takes the building in August 2026 and pays you the same month. Your window opened in March 2026 and closes December 31, 2029.

A threat exists when a government official or body with the power to take property tells you it has decided to acquire yours, and you have good reason to believe it will be condemned if you do not sell. A news report counts once an official confirms it. If you relied on something said out loud, get it confirmed in writing.

The clock does not start with the taking. It starts with the tax year you first realize gain, which is the year your payments first add up to more than your adjusted basis. That can be before the taking, if you were paid an advance, or after it, if the award came later or in parts. Money you could withdraw, such as a court deposit, counts as paid. A business on the accrual method uses the date the award became fixed, or the date it was paid if that came first.

Enter that date in “Date gain realized, if different.” If you were paid in full when the property was taken or sold, leave it blank.

Example: your adjusted basis is $500,000. The city pays you $600,000 in December 2025 and takes the property in August 2026. Your gain was first realized in 2025, so your deadline is December 31, 2028, not 2029.

To defer all of your gain, your replacement must cost at least your net award. Debt counts toward that cost. That is the big difference from a 1031 exchange, where cash cannot be replaced with new debt.

Example: a $2,000,000 award pays off an $800,000 loan, leaving $1,200,000 in cash. A DST purchase of $600,000 equity at 70% LTV carries $1,400,000 of debt, so it costs $2,000,000 and all of the gain may be deferred, with $600,000 of the cash not reinvested. More debt also means more risk.

The part of the net award you do not reinvest is taxable, up to the amount of your gain. The calculator treats it first as depreciation recapture, up to the depreciation you have taken, including depreciation from prior exchanges, and then as capital gain.

Legal, appraisal and engineering fees you paid to get the award. Interest paid on a late award is not part of the award; it is ordinary income. Relocation payments are not part of the award either. Severance damages for land you keep are handled separately and are not included here.

No. Unlike a 1031 exchange, you can receive the award yourself and hold it until you buy your replacement property.

An extension of the replacement period can be requested, generally before it ends. It is not automatic. Talk to your CPA well before your deadline.

Often not. A C corporation, or a partnership more than half owned by C corporations, cannot use a replacement bought from a related party at all. For everyone else, the rule applies when your total gain for the year on all property taken or lost is more than $100,000.

There is one exception: the rule does not apply if the related party bought the property from someone unrelated during your replacement period. A DST bought from an unrelated sponsor is not affected.

Long-term capital gain is taxed at 0%, 15% or 20%, depending on your taxable income. A large gain usually pushes most people into 15% or 20%, so the box starts at 20%. Change it to your rate. Your CPA can tell you which one applies. The rates shown assume an individual who held the property for more than one year. A C corporation, or a holding period of one year or less, uses different rates.

The calculator treats all of your depreciation as depreciation on real estate, which is taxed at up to 25%. If part of it was on equipment, fixtures or other items, often from a cost segregation study, that part is taxed as ordinary income with no 25% limit. Some older buildings depreciated faster than straight-line also have part of their recapture taxed as ordinary income. Your CPA can split it for you.

It is the cost of your replacement less the gain you deferred. The deferred gain carries into the DSTs and becomes taxable when you sell them for cash.