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Gain (E7 · calcExch). realized = sale price − adjusted basis net boot = cash pulled + max(0, old debt − new debt) recognized (taxable now) = min(realized, net boot) loss is never recognized deferred = realized − recognized new-property basis = replacement price − deferred excess basis = max(0, replacement − sale price) → new money, bonus-eligible carryover basis = the rest → continues the old depreciation schedule Both branches. Sell-now layers the gain: §1245 recapture at ordinary rates on the cost-seg depreciation, unrecaptured §1250 at 25% on the building, the remainder at 20% LTCG, plus 3.8% NIIT (§1411). The exchange recognizes only the boot, in that same priority. Full deferral needs all proceeds reinvested and debt replaced or exceeded. Basis cross-link. Only excess basis qualifies for 100% bonus / cost-seg on the replacement (Reg. §1.168(i)-6); carryover basis is deferred gain, not new investment — it keeps the old schedule. The cost-seg studio forks on the excess only. Gates. Qualified intermediary engaged before the first closing (no constructive receipt, §1.1031(k)-1(g)); written 45-day identification on file; related-party legs hold 2 years (§1031(f)). Modeled range — the CPA signs the Form 8824 position.

Regime gate (calcOZ). window end = realization date + 180 days realized before 2026-07-05 → locked into OZ 1.0: deferral only to 2026-12-31, no achievable step-up, 10-yr exclusion survives (Notice 2026-40) realized on/after 2026-07-05 → OZ 2.0 reachable by investing between 2027-01-01 and the window end Both branches (2.0). pay now: tax = G·(LTCG+NIIT); invest net for 10 yr; exit tax on that growth fund: invest G whole · year-5 recognition = G·(1−step)·(LTCG+NIIT), step 10%/30% year-10 exit: fund appreciation excluded · year-5 tax opportunity-costed forward Decomposition. Deferral value (timing) + step-up value (G·step·rate — the only forgiveness of the old gain) + exclusion value (tax avoided on fund growth). The growth rate is a labeled assumption. Basis freezes at the 30-year FMV on long holds. Rural lane. QROF = ≥90% assets in wholly-rural zones → 30% step-up; substantial improvement halved to 50% of basis, effective now and for existing rural positions (Notice 2025-50). Zone status of any tract is a routed determination until the 2027 map publishes (Rev. Proc. 2026-14). Gates. Fund self-certification on file · 180-day gain tracing with the election · tract determination · working-capital plan for any pre-2027-zone acquisition after 2026-12-31 · inclusion-event review before any transfer (gifts and most transfers trigger the deferred gain) · California does not conform — the CA branch renders in the year of the gain. Modeled range — the CPA signs the election; the attorney signs fund qualification.