Top 50 Questions about Farmland
Yes, you can use a 1031 Tax-Deferred Exchange to reinvest proceeds from selling farmland into a new building or facility. This process—called an improvement exchange—lets you defer capital gains taxes while shifting your investment into structures such as hog barns, cattle buildings, or machinery shops.
How an Improvement Exchange Works
- Eligible Projects:
- You can reinvest your proceeds into new buildings or facilities rather than purchasing another piece of farmland.
- Common examples include livestock barns, storage sheds, and equipment shops.
- Key Rules:
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To qualify, you must follow strict IRS timelines:
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45-Day Identification Period: You must identify the replacement property or project within 45 days.
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180-Day Completion Period: You must complete the construction within 180 days of the sale.
The IRS requires that installed improvements count toward the exchange. Materials sitting on the ground don’t qualify, so contractors must actively install them before the deadline.
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- Timing is Critical:
- Staying ahead of the timeline makes or breaks a successful exchange.
- You should line up contractors, secure materials, and finalize building plans before selling your farmland.
- Once the sale closes, the building process must begin immediately to stay on track for the 180-day requirement.
Key Takeaways
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A 1031 improvement exchange lets you reinvest farmland proceeds into new barns, shops, and other structures.
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You must complete the building within 180 days.
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Careful planning and early coordination increase your chances of qualifying.
If you want expert guidance and a smooth exchange process, contact David Whitaker – Iowa Land Guy today!
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David Whitaker | Iowa Land Guy
