1031 Exchanges and Divorce in Oregon: What You Need to Know

Understanding How 1031 Exchanges Work in Oregon Divorce Cases

If you’re going through a divorce in Oregon and own real estate, you may be wondering whether a 1031 exchange—a tax-deferral tool for investment properties—can help preserve value during asset division. At Romano Law, we help clients navigate the intersection of divorce law, property division, and tax strategy in Oregon.

What Is a 1031 Exchange?

An IRC §1031 exchange (also known as a like-kind exchange) allows you to defer capital gains tax when selling one investment property and reinvesting the proceeds into another. This can result in significant tax savings—if structured correctly.

Basic Requirements for a 1031 Exchange:

Both properties must be held for investment or business use.
The replacement property must be of equal or greater value.
Strict timelines must be followed (45-day identification window, 180-day closing deadline).
A qualified intermediary must hold the funds during the exchange process.

Can Divorcing Couples in Oregon Use a 1031 Exchange?

Yes—but it’s complicated. Divorcing spouses may be able to use a 1031 exchange to preserve tax advantages when dividing investment properties. However, timing, ownership structure, and intent are critical.

Key Scenarios:

Pre-Divorce Exchange: If the couple still jointly owns the property, they may complete a 1031 exchange before the divorce is finalized.
Post-Divorce Exchange: If one spouse is awarded the property in the divorce, they may complete the exchange individually—provided they meet IRS rules.
Avoiding Taxable Gain: If transfers aren’t properly structured, a property division could trigger capital gains tax—defeating the benefits of a 1031 exchange.

Practical Legal Considerations in Oregon

Marital vs. Separate Property

Oregon is an equitable distribution state. Property acquired during the marriage is generally considered marital—even if held in one spouse’s name. This includes investment properties that may be subject to a 1031 exchange.

Divorce Judgments and 1031 Exchanges

Oregon courts can incorporate the use of a 1031 exchange into the final divorce judgment when:

It’s necessary to divide investment real estate.
It helps preserve tax benefits for both parties.
One spouse is awarded the property and intends to complete an exchange.

Tips for Using a 1031 Exchange During or After Divorce

Plan Early: Coordinate with your attorney and CPA before the divorce is finalized.
Use a Qualified Intermediary (QI): A QI is essential to keeping the transaction compliant and tax-deferred.
Correct Title Ownership: The party completing the exchange must hold legal title before the transaction begins.
Avoid Triggering Taxable Events: Property transfers between spouses as part of divorce can sometimes inadvertently disqualify the exchange if not timed correctly.

Work With an Oregon Divorce Attorney Experienced in 1031 Exchanges

At Romano Law, we guide divorcing clients through the financial complexities of dividing real estate—especially when investment properties and tax deferral strategies like 1031 exchanges are involved. We help protect your long-term financial interests with clear legal guidance, coordination with tax professionals, and strategic planning.

Romano Law, P.C.
13765 NW Cornell Rd, Suite 250
Portland, OR 97229

Call today to schedule a confidential consultation with a knowledgeable Oregon divorce lawyer.

Frequently Asked Questions

Can we complete a 1031 exchange while our divorce is pending?
Yes, but it requires planning, cooperation, and legal guidance to ensure IRS compliance.

Will the court order a 1031 exchange in an Oregon divorce?
Possibly. The court may incorporate an exchange into the judgment if it benefits both parties and preserves equity.

Can I do a 1031 exchange after being awarded the property in the divorce?
Yes—if you meet all IRS requirements and the property is properly deeded to you before the exchange begins.