Last reviewed October 14, 2026.
Some of my favorite deals start somewhere else. A client sells a rental in another state and wants to land in an Aspen condo. Or an Aspen owner sells and trades into something new. Either way, the conversation often turns to a 1031 exchange.
A 1031 exchange lets you postpone tax on the gain when you sell business or investment property and reinvest in similar property. It's tax-deferred, not tax-free. [1]
First, an important note. I'm a real estate broker, not a tax advisor or attorney. This guide explains the basics and what I've seen work in Aspen. Before you sell anything, talk with a CPA and a qualified intermediary about your own situation.
Every rule below links to its official source. I checked each one on October 14, 2026.
Real property only. Since 2018, like-kind exchange treatment applies to real property. Form 8824 asks you to describe only real property. [2]
Held for business or investment. Both the property you sell and the one you buy must be held for use in a trade or business or for investment. A primary residence doesn't qualify. Neither does a second home or vacation home used mainly for personal use. [1]
Like-kind is broad for real estate. Most real estate is like-kind to other real estate. A rental house is like-kind to vacant land, for example. But U.S. property isn't like-kind to property outside the U.S. [1] So a rental in another state can generally be exchanged for an Aspen condo, and the other way around.
Some things never qualify. Partnership interests are on the excluded list. [1] That matters if you own Aspen property with family or partners in an LLC. Co-owners who want to go separate ways need planning well before a sale.
Your history has to back it up. Whether a property was "held for investment" depends on the facts. Your tax returns should show the same story: rent reported, depreciation taken. If you lived in the place or used it a lot yourself, talk to your CPA early.
This is the one I get most in Aspen. Can a ski condo you sometimes use be part of a 1031?
The IRS has a safe harbor for this, in Revenue Procedure 2008-16. If you meet it, the IRS won't challenge whether the unit counts as held for investment. For a property you sell, you must have owned it for at least 24 months right before the exchange. In each of the two 12-month periods in that window: [3]
The same tests apply to a replacement property for the 24 months after you acquire it. [3]
If you want to use your new Aspen place for a family ski week, plan around those numbers with your CPA. Falling outside the safe harbor doesn't automatically disqualify you, but you lose the certainty.
These are the rules that break exchanges.
The IRS says these limits can't be extended for hardship, except for presidentially declared disasters. [1] If you sell late in the year, watch the tax return date. It can cut the 180 days short unless you file an extension. [2]
Your written identification must be signed by you and delivered to someone involved in the exchange, like the seller of the replacement property or your qualified intermediary. Telling your own attorney, real estate agent or accountant doesn't count. Real estate must be clearly described, by legal description, street address or a distinguishable name. [1]
Treasury regulations limit how many properties you can identify. You need to meet one of these: [4]
In practice, most of my buyers use the 3-property rule. It gives you a first choice and two backups.
If you take control of the cash from your sale before the exchange is done, the whole exchange can fail and all the gain can become taxable. [1]
That's why most people use a qualified intermediary (QI). The QI holds the sale proceeds and uses them to buy the replacement property. [1]
"Boot" is anything you receive that isn't like-kind property. Cash, relief from debt, or other property can all trigger some taxable gain in the year of the exchange. [1]
The exchange can still qualify. You just pay tax to the extent of the boot. [1] A common example is trading into a less expensive property and keeping the difference. Another is ending up with a smaller mortgage on the new property than you had on the old one. Your CPA can run the numbers before you choose a price range.
One more thing to know: your basis carries over. The new property generally takes the basis of the old one, with adjustments. That means less depreciation going forward, and the deferred gain comes due when you eventually sell without another exchange. [1] You report the exchange on Form 8824 with your tax return. [2]
If you're selling Aspen property and you live outside Colorado, plan for Colorado withholding.
Colorado generally requires withholding when the seller is a nonresident individual, estate or trust, or a corporation organized outside Colorado. The amount is the lesser of 2% of the sales price or the seller's net proceeds. It doesn't apply when the price is $100,000 or less. [5] The withholding is sent in with form DR 1079, and the transfer is reported on form DR 1083, within 30 days of closing. [5]
DR 1083 includes an affirmation the seller can sign that no Colorado income tax is reasonably estimated to be due on the gain. [5] Whether that fits your exchange is a question for your CPA.
Foreign sellers may also face federal FIRPTA withholding. I cover closing-day costs in my closing costs guide.
The rules are federal. The hard part is finding the right Aspen property in time. Here's what I've seen.
Start your search before you sell. Investor-friendly inventory here is thin. Once your sale closes, 45 days goes fast. I like to have buyers tour, run numbers and know their top choices before their sale even closes. I also reach out to other brokers for off-market and coming-soon properties.
Contingent offers stall. An offer that depends on selling another property first is harder for an Aspen seller to accept. I've seen strong offers sit while the other sale was still pending. Talk with your QI and CPA about your options before you write.
Know what the replacement has to do. Most of my exchange buyers want rental income. That usually means checking that the property can get a short-term rental permit. Lodge-zone properties come up often, because the City has no cap on Classic STR permits in its lodge and commercial zones, so there's no waitlist. [6] Remember that an Aspen STR permit doesn't transfer to a buyer. [7] More in my STR permit guide.
Read the HOA rules early. Some Aspen associations require 30-day minimum stays. That can turn a planned nightly rental into a long-term rental. It doesn't hurt the exchange. It does change your income, so find out during your 45 days, not after.
A lease in place can help. Some properties come with a tenant whose lease the new owner takes over. For an exchange buyer, that can mean rental income and investment use from day one. Read the lease carefully.
Identify backups. Your first choice can fall apart in due diligence. Use your identification to name real alternatives, within the 3-property or 200% rule.
Know how much you're adding. When owners trade up, I ask early how much new cash they want to put in beyond their sale proceeds. It shapes the price range, and it affects boot.
Whether you're trading into Aspen or out of it, I'll help you line up the real estate side so your deadlines aren't a scramble. I'll help you find properties that fit before you sell and check permits and HOA rules. I'll also coordinate with your CPA and qualified intermediary.
Buying a rental here? Read my guide to buying an investment property in Aspen, then see how I work with buyers. Selling? See how I work with sellers.
Only if it's held for investment. A home used mainly for personal use doesn't qualify. The IRS safe harbor in Rev. Proc. 2008-16 covers a unit rented at fair rent 14 days or more a year, with personal use of no more than the greater of 14 days or 10% of the rented days, for two years.
You have 45 days after selling to identify replacement property in writing. You must receive it by the earlier of 180 days after the sale or your tax return due date, including extensions.
Up to three of any value, or any number whose total value is no more than 200% of what you sold. If you exceed both, you must acquire at least 95% of the total value you identified.
No. Your agent, attorney, accountant or employee, or anyone who served in those roles in the past two years, can't act as your intermediary. You can't be your own either.
Generally, yes. Colorado requires withholding of the lesser of 2% of the price or the net proceeds for nonresident sellers, with exceptions, including sales of $100,000 or less. Ask your CPA how it applies to an exchange.
No. It's tax-deferred. Your basis carries over to the new property, and the deferred gain is taxed when you sell without another exchange. Cash or debt relief you receive can be taxed in the year of the exchange.
I'm a real estate broker, not a tax advisor or attorney. This guide is general information, not tax or legal advice. Talk with a CPA and a qualified intermediary before you sell or buy.
Katherine Coleman, Broker Associate | The Agency Aspen | Own In Aspen
205 S. Mill Street, Suite 110, Aspen, CO 81611 | owninaspen.com | CO License FA.100088194
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