Why 1031 Exchanges Fail — and How Brooklyn Investors Can Get It Right
By Peter Mancini, Licensed Real Estate Broker
Pen Realty | Member of REBNY & BNYMLS
If you’re a Brooklyn real estate investor looking to defer capital gains taxes through a 1031 Exchange, one critical element can make or break your transaction: the timeline.
At Pen Realty, we’ve worked with sellers from Bay Ridge to Bushwick, and the pattern is always the same. Investors focus on the property — but overlook the clock. And that’s where many 1031 Exchanges fall apart.
What Is a 1031 Exchange?
A 1031 Exchange, as defined under Section 1031 of the Internal Revenue Code, allows investors to defer capital gains taxes by selling an investment property and reinvesting the proceeds into a “like-kind” property.
The tax benefit is powerful — but comes with strict IRS deadlines that you cannot miss.
The Two Deadlines That Matter Most
According to the IRS, these are the two timelines that dictate a successful 1031 Exchange:
1. The 45-Day Rule
Once you close on the sale of your original property, you have exactly 45 calendar days to identify your replacement property — in writing — to your Qualified Intermediary (QI).
This deadline includes weekends and holidays. There are no extensions, even if the seller is unresponsive or financing is delayed.
2. The 180-Day Rule
From the same closing date, you then have 180 total days to close on one of the properties you identified.
If you miss that deadline, even by a single day, you lose your eligibility for the tax deferral — and could face a significant tax bill.
Real Stories from the Market
The Real Deal has covered multiple cases where New York City investors — some with extensive portfolios — have fumbled their 1031 Exchange simply because they misjudged timing or documentation.
Similarly, a recent Wall Street Journal feature noted that a lack of IRS grace periods has led to millions in taxes being unexpectedly triggered. For Brooklyn investors dealing with competitive listings and supply constraints, this risk is real.
How Pen Realty Helps You Navigate the 1031 Timeline
At Pen Realty, we believe strategy beats stress. That’s why we offer every 1031 client A Signature Experience — built on clarity, deadlines, and disciplined execution.
Here’s how we support you:
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🔹 Pre-Exchange Planning: We help you prepare before you list your original property.
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🔹 Access to a Trusted Network: We connect you with vetted QIs, attorneys, and lenders familiar with the 1031 process.
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🔹 Brooklyn Market Expertise: From mixed-use buildings in Park Slope to income-generating properties in Dyker Heights, we match your investment criteria with real inventory.
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🔹 Timeline Tracking: We create a custom 45/180-day calendar to keep you compliant and confident every step of the way.
Download Our Free 1031 Exchange Checklist
To help you stay on track, we’ve created a FREE 1031 Exchange Checklist designed for Brooklyn investors like you. It outlines every key step, from working with a Qualified Intermediary to property identification and closing strategy.
Want more guidance?
📺 Watch our full 1031 Exchange Video Series on YouTube where I walk through each step of the process.
Giving Back While Building Wealth
This series and resource library are part of a deeper mission. I walk for CaringKind NYC every year in memory of my father and in support of the Alzheimer’s community.
If this content helped you or someone you know, consider giving back through the link above. Your donation supports families in need of Alzheimer’s support services across New York.
Final Thoughts
A 1031 Exchange is one of the most powerful wealth-building strategies in real estate — especially in a high-value market like Brooklyn. But the tax savings only work when you stay ahead of the timeline.
At Pen Realty, we take pride in helping our clients avoid the hidden pitfalls and succeed with confidence.
📞 Ready to explore your next move?
Let’s talk. Visit PenRealty.net to book your strategy session.
Peter Mancini | Pen Realty
“A Signature Experience from listing to legacy.”
