Learn 10 things you need to know about 1031 exchanges. A 1031 Exchange allows an investor to exchange one property for another and have it be tax free.After completing a 1031 exchange, you must report the transaction to the IRS using Form 8824 to maintain the transaction's taxdeferred status. Is it possible to defer state tax when doing a 1031 exchange? In some states, yes. To download this guide as a PDF, fill out the form on the right. When completing the form, the taxpayer should check the box indicating that the sale is part of a 1031 exchange. How Long Do I Have To Complete the Purchase of a Replacement Property? The download should start. Once it is complete, open the file with Adobe Acrobat Reader.