Can I do a 1031 exchange with inherited property?

Yes, you can do a 1031 exchange with inherited property — but it's rarely the optimal play because of the stepped-up basis.

Why 1031 is usually unnecessary for inherited property:

If you inherit a $1.5M property and sell it for $1.5M shortly after, your stepped-up basis means capital gains are zero. There's nothing to defer — you can take the cash without tax consequence.

A 1031 exchange is designed to defer capital gains tax that would otherwise be due. If there are no gains, there's nothing to defer.

When 1031 might make sense for inherited property:

- You hold the inherited property for several years before selling. Appreciation since the date of death has accumulated, and now there's real gain to defer. - You're using the inherited property as a rental investment and want to swap into different investment property without realizing gains. - You're consolidating multiple inherited properties into a single larger investment.

1031 rules to know: - Must be investment property to investment property (not primary residence). - 45-day identification window and 180-day close window are strict. - "Like-kind" is interpreted broadly for real estate (single-family to multifamily, retail to office, etc.). - California has specific clawback rules if you 1031 out of California into another state — be careful here.

For most inherited-property situations, the stepped-up basis is the bigger tax planning tool than 1031.

I can give you a better answer with more information. Every situation I've handled in 18 years has had its own wrinkles. To talk it through with someone who's done this before: (510) 504-0402 during business hours, (406) 205-9003 anytime, or roger@grubb.net.