# Section 1031 Tax Rule Lets Landlords Swap Buildings Forever

> Landlords defer capital gains tax by swapping properties indefinitely under a 1921 rule, with the bill vanishing at death.
- Title: Section 1031 Tax Rule Lets Landlords Swap Buildings Forever
- Summary: Landlords defer capital gains tax by swapping properties indefinitely under a 1921 rule, with the bill vanishing at death. Landlords can swap rental…
- Keywords: section 1031, capital gains tax, landlord, real estate, deferred tax, property swap, tax deferral, death tax, federal tax, depreciation, Section, 1031
- Source: 24/7 Wall St. — https://247wallst.com/personal-finance/2026/10/09/a-1921-rule-called-section-1031-lets-landlords-swap-one-building-for-another-forever-and-never-pay-capital-gains-then-they-die-and-the-bill-disappears-for-good
- Author: Vilma Rios
- Published: 2026-10-10T02:39:27+00:00
- Read time: 1 min
- Topics: section 1031, capital gains tax, landlord, real estate, deferred tax, property swap, tax deferral, death tax, federal tax, depreciation
## Section 1031 Rule
A 1921 tax rule lets landlords swap one rental property for another indefinitely without triggering capital gains tax.
## Deferred Tax Calculation
A landlord paid $400,000, deducted $250,000 in depreciation, and trades for $1.4 million, creating a $1.25 million taxable gain.
## Federal Tax Bill
The federal tax on $1.25 million gain is $310,000, with $62,500 on depreciation and $200,000 on long-term gain.
## Section 1014 Rule
Section 1014 resets the cost basis of inherited property to its market value at death, wiping out deferred gains for heirs.
## Swap Mechanics
Landlords must use a qualified intermediary, identify replacement property within 45 days, and close within 180 days to defer tax.
## State Variations
California requires owners swapping California property for out-of-state property to file Form FTB 3840 annually for tax collection.
## Tax Implications at Death
If a landlord trades into a $1.4 million building worth $2 million at death, heirs inherit it with a $2 million basis and owe no federal capital gains tax.
## Key Steps for Landlords
Landlords over 60 should run both numbers, consider Delaware statutory trusts, and keep detailed records to avoid missed deadlines.
## Key takeaway

Landlords can swap rental properties forever without capital gains tax, but the tax bill disappears for heirs at death.