Related parties defined
Related parties include close family (siblings, spouse, ancestors, lineal descendants) and entities you control (generally more than 50% ownership), among others defined in the code.
The two-year rule
If you exchange with a related party, both parties generally must hold the properties for at least two years, or the exchange can be disqualified and the tax triggered retroactively.
Why the rule exists
It stops families from shuffling basis to cash out gains tax-free. Related-party exchanges are allowed but heavily scrutinized.
Frequently asked questions
Can I do a 1031 exchange with a family member?
Yes, but related-party exchanges carry a two-year holding requirement and extra scrutiny.
Who counts as a related party?
Close family and entities you control (generally over 50%).
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.