can you 1031 exchange stocks? Guide

Can you 1031 exchange stocks?

Many investors ask can you 1031 exchange stocks when looking for ways to defer capital gains taxes after selling shares. The short answer upfront: generally no — under current U.S. tax law, stocks, bonds and most securities are explicitly excluded from Section 1031 like‑kind exchange treatment. This article explains why, cites authoritative guidance, outlines the historical context, and presents commonly used alternatives and practical steps for investors considering tax‑deferral strategies.

Short answer

Under current law (post‑2017), can you 1031 exchange stocks is answered plainly: no. Stocks, bonds, notes and other securities do not qualify for like‑kind exchange treatment under Section 1031.

Background — What is a Section 1031 exchange?

Section 1031 of the Internal Revenue Code allows deferral of gain when a taxpayer exchanges property held for productive use in a trade or business or for investment, provided the taxpayer receives like‑kind property and follows statutory timing and procedural rules. Historically, 1031 was used for a variety of property types, but it has long been most visible in real estate transactions where an investor sells one income property and acquires another qualifying property without immediate recognition of taxable gain.

Key mechanics commonly used in a 1031 exchange include the use of a qualified intermediary to hold proceeds, the 45‑day identification period to designate replacement property, and the 180‑day period to complete the exchange. These rules and the operational workflow are tailored to transfers of property interests rather than ordinary securities trading.

Legal framework and authoritative guidance

Internal Revenue Code Section 1031

Section 1031 provides a statutory basis for nonrecognition of gain when like‑kind property is exchanged. The statutory language applies to property held for productive use in a trade or business or for investment. Historically, the textual scope of "property" allowed for some debate about personal property and other asset types, but congressional action and IRS guidance have narrowed the scope over time.

Tax Cuts and Jobs Act (2017) and the effective change (2018)

As of January 1, 2018, due to the Tax Cuts and Jobs Act of 2017 (enacted December 22, 2017), Section 1031 like‑kind exchange relief is limited to exchanges of real property. This legislative change removed personal property and other non‑real estate assets from eligibility. In practice, that means taxpayers can no longer rely on Section 1031 to defer gain from exchanges involving stocks, bonds, or other securities.

As of January 1, 2018, the law's change is the primary reason why the repeated question “can you 1031 exchange stocks?” now has a straightforward negative answer for nearly all routine stock transactions.

IRS guidance and regulations

The Internal Revenue Service has repeatedly clarified the scope of property excluded from like‑kind exchange treatment. An IRS fact sheet (FS‑2008‑18) and Treasury regulations explicitly list exclusions such as stocks, bonds, notes, other securities or evidences of indebtedness, and partnership interests. Even before the 2017 statutory narrowing, IRS guidance placed securities and similar instruments outside the typical application of 1031.

As of October 2008, the IRS fact sheet enumerated the common exclusions and described the practical application of like‑kind exchange rules. Combined with the 2017 legislative change, this makes it clear that securities are not eligible for 1031 deferral.

What qualifies as "real property" vs. excluded property

For Section 1031 purposes under current law, "real property" generally includes land, buildings, and permanent structures — in short, classic real estate assets and real estate interests. Like‑kind treatment applies when both the relinquished and replacement properties are real property held for investment or for use in a trade or business.

Excluded property includes personal property and financial instruments. Specifically, stocks, bonds, notes, securities, certificates of trust or beneficial interest, and partnership interests are excluded. This exclusion is explicit in IRS materials and reinforced by the TCJA limitation.

Historical context and prior narrower uses

Before the 2018 effective date of the TCJA limitation, Section 1031 was sometimes applied to certain types of personal property exchanges, depending on the circumstances and regulatory interpretation. That made the legal landscape more complex: in some industries, like‑kind treatment could be argued for certain equipment or intangible property in a limited way.

However, over decades the IRS and courts narrowed the practical scope, and the 2017 legislation codified the practical endpoint: 1031 now applies to real property only. When investors today ask “can you 1031 exchange stocks?” they must understand the historical nuance but also the current statutory reality.

Why stocks do not qualify

Stocks are categorized as securities — ownership or debt instruments that represent an interest in a company or a creditor relationship. Section 1031 and IRS guidance explicitly exclude stocks and other securities from like‑kind exchange treatment. Practically, this means that selling stock for a gain is a taxable event subject to capital gains taxation, unless another tax deferral or exclusion applies (for example, retirement accounts or specialized corporate restructuring rules).

Because securities are traded in markets and often held for purposes distinct from real estate investment, policymakers and tax administrators have treated them differently from real property for the purposes of like‑kind exchanges.

Common investor alternatives and tax‑deferred strategies for securities

Even though the answer to “can you 1031 exchange stocks?” is generally no, investors have several other tax planning tools and strategies to manage capital gains from securities. These alternatives address different goals — tax deferral, tax reduction, income management, or estate and philanthropic planning.

Tax‑loss harvesting

Tax‑loss harvesting is a commonly used investment technique: realize losses in a portfolio to offset realized gains, thereby reducing taxable income in the current tax year. Investors must follow wash sale rules when repurchasing substantially identical securities within a disallowed timeframe. For many taxable portfolios this is a practical and routine approach to improve after‑tax returns.

Holding for long‑term capital gains rates

Long‑term capital gains rates are generally lower than short‑term ordinary income tax rates. By holding securities beyond the short‑term threshold (typically one year), investors can often benefit from preferential tax rates on gains. This is an important non‑technical but powerful strategy for individual investors focused on tax efficiency.

Retirement accounts and tax‑advantaged accounts

IRAs, 401(k)s and other qualified retirement accounts provide tax‑deferred (or tax‑free, in the case of Roth accounts) treatment for securities gains. Shifting investment activity into tax‑advantaged vehicles reduces or defers tax liability, though contribution and distribution rules apply. If your objective is to defer tax on securities gains, maximizing appropriate retirement account use is often more relevant than 1031 mechanics.

Qualified Opportunity Funds, installment sales, charitable remainder trusts, and other tools

Depending on individual circumstances, strategies such as investing capital gains into Qualified Opportunity Funds (QOFs), structuring installment sales, using charitable remainder trusts (CRTs), or gifts to charitable organizations may achieve partial deferral, tax smoothing, or philanthropic and estate objectives. Each approach carries distinct legal and tax consequences and requires advice from a qualified tax advisor.

Exchange into real estate strategies (indirect paths)

Some investors consider moving proceeds from securities into real estate to take advantage of 1031’s benefits going forward. It’s important to recognize that exchanging stocks directly into real property via Section 1031 is not permitted. An investor could sell securities, recognize the gain, then use after‑tax proceeds to buy real estate and later use 1031 for swaps among real properties. That sequence does not make the original securities sale eligible for 1031 treatment; it simply places the investor into a real estate position that may be subject to 1031 on future qualifying exchanges.

Section 721, UPREITs and DSTs — related tax‑deferral mechanisms for real estate investors

For clarity: Section 721 of the Internal Revenue Code allows nonrecognition treatment when a taxpayer contributes property to a partnership in exchange for an interest in the partnership (a contribution to a partnership in exchange for partnership interests). In real estate markets, combinations of 1031 exchanges with Delaware Statutory Trusts (DSTs) and later contributions via Section 721 (for example, converting partnership interests into operating partnership interests of a real estate investment trust structure like an UPREIT) are planning pathways for deferring taxes and gaining liquidity while maintaining a real estate investment position.

These techniques are complex and are applicable to real property and certain partnership interests that operate in the real estate context. They do not create a way to treat stocks themselves as eligible for 1031. In particular, public REIT shares are not treated as real property for Section 1031 purposes.

Rare or complex exceptions and special structures

There are narrowly tailored corporate‑tax provisions, reorganizations, and transactional techniques under other sections of the Internal Revenue Code that can defer recognition of gain for certain business or corporate interest transactions. Some complex corporate restructurings, reorganizations, or very specialized tax planning might achieve deferral for business interests, but these are not typical 1031 exchanges and do not mean that ordinary stock sales can be freely swapped via Section 1031.

Because these options are highly technical and facts‑specific, they require specialized tax counsel. Do not assume that an informal or ad‑hoc interpretation allows you to treat stocks as 1031 property.

Practical implications for investors

If your question is “can you 1031 exchange stocks?” and you are contemplating a securities sale with an eye to tax deferral, the practical implications are:

• You cannot rely on Section 1031 to defer tax on the sale of stocks, bonds, or other securities.
• Plan trades and timing around available alternatives (tax‑loss harvesting, holding for long‑term gains, retirement accounts).
• If you intend to shift from securities to real estate for tax‑deferred future exchanges, recognize that the sale of securities itself will usually trigger taxable gain; subsequent real estate purchases can only be subject to 1031 for future qualifying real property exchanges.
• For sophisticated corporate or partnership interests, consult a tax attorney or CPA about non‑1031 mechanisms that may defer gain under other code provisions.

Steps to take if you want tax‑deferral on proceeds from selling securities

Follow practical steps rather than assuming a 1031 path:

• Consult a CPA or tax attorney before executing large securities trades if tax consequences matter to you.
• Consider tax‑loss harvesting to offset gains where appropriate and allowed by wash sale rules.
• Evaluate whether holding positions to qualify for long‑term capital gains treatment fits your investment objectives.
• Review available tax‑advantaged accounts (IRAs, 401(k)s) and contribution rules to reduce taxable events.
• If moving into real estate is a goal, plan the timing and use of qualified intermediaries and understand 45/180 day rules for any future 1031 exchanges among real properties.
• For advanced corporate or partnership transactions, retain specialized tax counsel to assess whether other code provisions (outside Section 1031) can achieve desired outcomes.

See also

• Section 1031 (like‑kind exchanges)
• Section 721 (contributions to a partnership)
• REIT (Real Estate Investment Trust)
• Delaware Statutory Trust (DST)
• Tax‑loss harvesting
• Tax Cuts and Jobs Act (2017)

References and further reading

Sources used in preparing this article include authoritative IRS materials and specialist 1031 commentary. For further detail, consult the underlying IRS fact sheets and professional 1031 guidance:

• IRS guidance on like‑kind exchanges and exclusions (IRS fact sheet FS‑2008‑18). As of October 2008, the IRS fact sheet clarified that stocks and securities are excluded.
• Tax Cuts and Jobs Act of 2017 (enacted December 22, 2017) — effective limitation of Section 1031 to real property as of January 1, 2018.
• Summaries and FAQs from 1031 advisory services explaining practical mechanics (timing rules, qualified intermediaries) and how the TCJA affected eligibility.
• Articles and practitioner notes (Deferred.com, Realized1031, 1031exchange.com, and industry DST/UPREIT discussions) describing market practice and alternatives.

As of January 1, 2018, per the Tax Cuts and Jobs Act, Section 1031 is limited to exchanges of real property. As of October 2008, the IRS fact sheet FS‑2008‑18 explicitly listed stocks, bonds and other securities as excluded from like‑kind exchange treatment.

Practical example

Imagine you hold a concentrated stock position that has appreciated significantly and you ask “can you 1031 exchange stocks?” If you sell the stock today, you will generally realize taxable capital gain. You may pursue tax‑loss harvesting elsewhere in your portfolio, spread gains over time using installment sales where appropriate, or place future investments into real estate and utilize 1031 for subsequent qualifying real estate exchanges. None of these paths converts the current stock sale into a Section 1031 exchange.

News and regulatory timing (select dated notes)

As of October 2008, per IRS documentation, the tax authority listed securities as exclusions from like‑kind exchanges. As of December 22, 2017 (enactment date of the Tax Cuts and Jobs Act), Congress revised Section 1031 to limit applicability to real property, a change that became effective January 1, 2018. These regulatory and legislative milestones are the primary reasons the routine question “can you 1031 exchange stocks?” is now answered negatively.

Practical checklist before selling securities with tax concerns

• Confirm your cost basis and holding period for each security.
• Estimate expected capital gains tax at federal and state levels (without assuming 1031 relief).
• Consider offsetting strategies (loss harvesting, charitable giving, installment sale) and their rules.
• Assess whether tax‑advantaged accounts can be used to shield future gains.
• If considering a move into real estate, prepare a plan that recognizes the securities sale will usually be taxable and plan 1031 steps only for future qualifying real estate swaps.
• Consult a CPA or tax attorney for tailored guidance.

Practical note about platforms and wallets

If you are an investor using crypto or tokenized assets and are considering similar questions about deferral, remember that Section 1031 rules discussed here apply to U.S. federal tax law for property and securities. For custody, trading, or wallet use, consider secure and compliant platforms. For crypto wallet recommendations, Bitget Wallet is an integrated option aligned with Bitget services. For trading and custody of tokenized assets, prioritize platforms and wallets with robust security and compliance practices.

Further considerations and caution

Tax rules change and factual circumstances matter. While the blanket answer to “can you 1031 exchange stocks?” is that securities are excluded from 1031, always verify current law and guidance before taking action. Complex corporate restructurings or highly specialized tax plans may achieve deferral under other code provisions — these require expert counsel.

What to do next

If your priority is tax‑deferral or tax planning around securities gains, begin by consulting a qualified tax professional. Review your portfolio for loss harvesting opportunities, confirm holding periods, and evaluate whether reallocating to tax‑advantaged accounts or pursuing specialized structures (with professional advice) makes sense for your situation. If you intend to move capital into real estate to utilize 1031 in the future, plan the sequence of transactions with trusted advisors and understand the operational requirements for future 1031 exchanges.

Learn more about secure custody and trading options for diversified portfolios using Bitget products and consider Bitget Wallet for secure self‑custody when appropriate.

Disclaimer

This article is informational only and does not constitute tax or legal advice. For personal tax planning and transactional decisions, consult a qualified tax attorney or CPA.