Thinking about selling a Wiregrass land tract and rolling the proceeds into a new parcel without a big tax bill? If you hold land for investment or business use, a 1031 exchange can help you defer capital gains while you step up to a better fit. The rules are strict, but with a clear plan and the right team, you can move from a timber tract to farmland, or from a vacant lot to an income property, with confidence. In this guide, you’ll learn the timelines, identification rules, paperwork, and local due diligence that matter most in Slocomb and across Geneva County. Let’s dive in.
What a 1031 exchange does
A 1031 exchange lets you defer gain when you swap real property held for investment or for use in a trade or business for other real property of like kind. Federal law under Section 1031 controls the process, and the Tax Cuts and Jobs Act limited exchanges to real property only. You will report the exchange on IRS Form 8824 for the year the exchange finishes.
To qualify, both the property you sell and the one you buy must be held for investment or business. Vacant land qualifies if you hold it for investment. Property held mainly for sale, such as subdivided lots a developer markets, usually does not qualify. Personal-use property, like a primary home or a family hunting camp used only for recreation, does not qualify unless you convert it to investment use and can show that intent.
In the Wiregrass, common like-kind swaps include trading a timber or investment tract for an agricultural tract, or exchanging an undeveloped lot in Geneva County for a rental farmhouse in nearby Dothan. The key is your intent and use, not whether the properties look the same.
The rules you must meet
Use a Qualified Intermediary
Most exchanges in our area are deferred exchanges. You sell first, then buy. You must use a Qualified Intermediary, often called a QI. The QI holds your sale proceeds so you never have actual or constructive receipt. If money touches your account, the exchange fails and your gain becomes taxable. Hire the QI and sign the exchange agreement before you close on the property you are selling. Confirm your title company will coordinate with your QI.
Know the 45/180 day deadlines
Your 45‑day identification period starts the day you close the sale of the property you are giving up. By Day 45, you must identify, in writing to your QI, the property or properties you might buy. You then have 180 days from the sale date to close on the replacement property or properties. If the due date of your tax return comes earlier, that earlier date can shorten the 180‑day window unless you file an extension.
Missing either deadline usually kills the exchange. Build in time for inspections, surveys, and lender steps so you can close on time.
Identify like-kind property the right way
Your identification must be specific and unambiguous. Use street addresses, parcel numbers, or legal descriptions. The IRS allows three main identification methods:
- Three‑property rule: identify up to three properties of any value.
- 200% rule: identify any number of properties as long as their total value does not exceed 200% of what you sold.
- 95% rule: if you identify more than allowed above, you must acquire at least 95% of the total value you identified.
Deliver your identification to your QI in writing by Day 45. Keep proof of delivery.
Watch value, debt, and boot
To fully defer tax, you generally need to buy equal or greater value and replace equal or greater debt. If you receive cash or other non‑like property at closing, that is called boot, and it is taxable up to your gain. Your basis in the replacement property usually carries over from the property you sold, adjusted by any boot you pay or receive.
Be careful with related parties
Exchanges with related parties can trigger special rules. If you exchange with a related party and that party disposes of the property within two years, your gain may be recognized. Families, partnerships, and entities under common control should plan ahead and involve a tax advisor.
Wiregrass land specifics that affect your exchange
Proving investment intent for land
If your Slocomb tract is vacant or agricultural, keep clear records that show investment use. Useful items include:
- Written lease agreements for grazing, farming, or hunting
- Timber management or conservation contracts
- Property tax classifications for agricultural or timber use
- Ads or listings that show long‑term rental intent
- A written plan to hold for investment and no active development activity
If you have used the land for personal recreation, convert it to investment use and hold it for a reasonable period before starting an exchange to lower audit risk.
Title, recording, and county taxes in Geneva County
In Alabama, deeds are recorded at the county Probate Office. For a Wiregrass deal, the Geneva County Probate Office handles recordings. Property tax classification can affect holding costs and negotiations, so confirm status with the Geneva County Tax Assessor, including any agricultural or timber classification. Alabama does not have a statewide real estate transfer tax, but you should verify any county-level fees or documentary requirements with local officials before closing.
Environmental and access checks that matter
Rural Wiregrass parcels often include low‑lying creek and river bottoms. Check FEMA flood maps to understand flood risk and insurance needs. If the property has wetlands or streams, federal or state permits may be needed for development. Confirm who owns timber and mineral rights and whether any rights have been severed. If prior uses are unknown or if the site had commercial activity, consider a Phase I environmental site assessment. Also verify zoning, any subdivision limits, road maintenance responsibilities, and legal access. An access easement or county maintenance status can affect marketability and timing.
A practical 1031 timeline for land investors
Here is a simple flow you can follow for a standard deferred exchange:
Pre‑sale phase
- Engage a Qualified Intermediary and sign an exchange agreement before closing.
- Gather basis records and investment use documentation.
- Let your listing agent and the buyer’s agent know you are doing a 1031 exchange so contracts and closings can align.
Closing day on the property you sell (Day 0)
- The QI receives the proceeds.
- The deed records, and your 45‑day clock starts.
Identification period (Days 1–45)
- Identify up to three replacement properties, or use the 200% or 95% rule if needed.
- Deliver identification in writing to your QI by Day 45. Keep a timestamped copy.
Acquisition period (Days 46–180)
- Close on your chosen replacement property or properties by Day 180.
- Ensure the settlement statement shows QI funds, not your personal funds, for exchange dollars.
Tax filing
- File IRS Form 8824 with your federal return for the year your exchange completes.
- Keep QI statements, closing statements, and identification letters for your records.
Common pitfalls in Slocomb exchanges
- Touching the money yourself. Always route funds through your QI. If funds hit your account, the exchange fails.
- Missing the 45/180 deadlines. Identify early, keep backups, and align inspections and surveys with the clock.
- Vague identification. Use exact parcel numbers or legal descriptions.
- Short on funds. If the replacement costs more than what you sold, line up financing so you do not create taxable boot.
- Related‑party missteps. Understand the two‑year related‑party rule and document your intent.
- Treating developer inventory as investment property. Subdividing and building for resale can disqualify an exchange.
- Skipping local diligence. Flood zones, wetlands, missing mineral or timber rights, and access issues can derail value and timing.
Reverse and improvement exchange options
If you find the perfect replacement property before you sell, a reverse exchange can work. Title is parked with an Exchange Accommodation Titleholder until you sell your relinquished property. If you need to build or improve the replacement property, an improvement exchange can be used. Both options are more complex and often more costly. They require strict structures and extra coordination among the QI, title company, and your attorney.
When to bring in advisors
A good exchange team reduces risk and saves time:
- Tax advisor with real estate expertise to model gain, basis, and boot exposure
- Qualified Intermediary with a proven Alabama track record
- Alabama‑licensed real estate attorney for exchange language and title issues
- Local title company and surveyor for clean legal descriptions and boundaries
- Environmental consultant if past use is unknown or if wetlands are present
- County planning and zoning contacts for access, subdivision, and use checks
Local investor scenarios you can model
- You sell a 60‑acre timber tract held for investment and buy a 70‑acre row‑crop tract. You document investment use on both sides. You identify the row‑crop tract within 45 days and close by Day 180. You replace equal or greater value and debt, so your gain is deferred.
- You own a vacant lot in Geneva County used for investment and swap into a rental farmhouse in Dothan. Both are real property held for investment, so the exchange can qualify if you meet all timing and QI rules.
Documents you will need
For the property you are selling
- Deed and any chain‑of‑title records
- Most recent title policy and surveys
- Settlement statements from your original purchase and any improvements
- Basis support: purchase price, acquisition costs, capital improvements, depreciation schedules if any
- Investment use documentation: leases, management agreements, tax returns showing rental income, or marketing showing investment intent
- Mortgage or payoff statements and any lien details
- Signed engagement letter with your QI before closing
For the property you are buying
- QI exchange agreement and written instructions to escrow
- Identification notice to your QI by Day 45 with specific legal description or parcel ID
- Purchase contract that accommodates exchange timelines and QI requirements
- Proof of QI funds used at closing as shown on the settlement statement
- Fully executed deed and recorded instruments for your files
Alabama and federal tax reporting
Your exchange is reported on IRS Form 8824 with your federal return for the year the exchange completes. Alabama often conforms to federal treatment, but state rules can change. Confirm state treatment with a qualified tax advisor or the Alabama Department of Revenue. Keep all QI statements, identification letters, and closing documents for the full statute of limitations, and longer if practical.
Get local help before you list or buy
A successful 1031 in the Wiregrass starts with early planning, the right QI, and local diligence on title, access, classification, timber and mineral rights, and floodplain risk. If you are considering an exchange in Slocomb or anywhere in Geneva County, reach out early so you can line up properties, paperwork, and timelines. Schedule a free consultation with Unknown Company to talk through your goals and map the best path forward.
FAQs
What is a 1031 exchange for Alabama land?
- It is a federal tax‑deferral strategy that lets you exchange real property held for investment or business use for other real property of like kind, following strict timelines and identification rules.
How long do I have to identify replacement property?
- You have 45 calendar days from the date you transfer the property you sold to identify replacement property in writing to your Qualified Intermediary.
How long do I have to close on the replacement property?
- You must acquire the replacement property within 180 days of the sale date, or by your tax return due date for that year if it comes earlier, unless you file an extension.
Can I 1031 exchange my personal hunting camp near Slocomb?
- Not if it is purely personal use; you would first need to convert it to investment use and be able to document that intent and holding period before an exchange.
What is boot in a 1031 exchange?
- Boot is cash or non‑like property you receive in the exchange, including certain debt reductions; it is generally taxable up to your realized gain.
Does Alabama follow federal 1031 rules?
- Alabama often conforms to federal treatment, but you should confirm current state practice with the Alabama Department of Revenue or a qualified tax advisor.
Can I do a reverse or improvement exchange in the Wiregrass?
- Yes, but these structures are more complex and costly, using an accommodation titleholder and strict rules, so you should plan carefully with your QI and attorney.
