Effective for closings on or after March 1, 2026

If you work in title, escrow, or real estate closings, you’ve probably heard about the new FinCEN Real Estate Reporting Rule. But when a 1031 exchange is involved, things can get confusing fast.

Here’s the bottom line: the deed controls, not the money source. Just because funds flow through a Qualified Intermediary doesn’t mean the transaction is exempt. You need to look at who’s actually listed as the buyer on the deed.

Let’s break down exactly how this works-

The 30-Second Test: Do You Need to File?

Before diving into the 1031 nuances, here’s the basic test for any transaction. You need to file a FinCEN Real Estate Report if all four of these are true:

#1 Residential property — The property is a 1-4 unit home, condo, co-op, or vacant land intended for residential construction, located in the U.S., Puerto Rico, or U.S. territories.

#2 Entity or trust buyer:  The buyer (transferee) on the deed is an LLC, corporation, partnership, trust, or other legal entity—not an individual.

#3 Non-financed:  There’s no loan from a financial institution with AML program and SAR duties covering all transferees. Important: seller financing, private loans, and hard-money loans typically count as “non-financed,” so these transactions are usually still reportable.

#4 No exemption applies:  None of the specific exemptions in the rule apply, including the 1031 Qualified Intermediary exemption.

If all four boxes are checked, someone needs to file.

The #1 Mistake With 1031 Exchanges

Here’s where most people get tripped up:

A 1031 exchange does NOT automatically mean exempt.

The only 1031-related exemption is a “transfer TO a Qualified Intermediary (QI) listed as the transferee on the deed.” That’s it.

If the QI is handling the funds but the deed shows “Exchanger LLC” as the buyer, there’s no exemption. Funding through a QI is not the same thing as a deed transfer to a QI.

This distinction matters because the rule looks at what’s recorded, not how the money moves behind the scenes.

Forward 1031 Exchanges: Two Common Scenarios

In a standard forward 1031 exchange, the exchanger sells their relinquished property and uses the proceeds to acquire a replacement property. Here’s how the reporting analysis typically plays out:

Scenario A: QI Wires Funds, But Deed Goes to Exchanger LLC

This is the most common setup. The QI holds the exchange funds and wires them at closing, but the deed names the exchanger’s LLC as the buyer.

Deed transferee: Exchanger LLC

Result: Not exempt just because it’s a 1031

Filing: If residential + non-financed + no other exemption applies, a report is required

Scenario B: Deed Actually Goes to the QI

Less common, but it happens. The deed names the QI as the transferee.

Deed transferee: The QI itself

Result: This transfer can qualify for the 1031 exemption

Note: If there’s a later deed transferring from the QI to the exchanger’s LLC, you need to test that second transfer separately

The rule is simple: check the deed, not the funding path.

Reverse 1031 Exchanges: Two Deeds, Two Tests

Reverse exchanges add complexity because they typically involve two separate deed transfers. The exchanger acquires the replacement property before selling the relinquished property, which requires a “parking” arrangement.

Here’s the typical structure:

Seller → EAT (Exchange Accommodation Titleholder) → Exchanger LLC

Each arrow represents a separate deed transfer, and each one needs to be tested independently using the 30-second test above.

Transfer 1: Seller to EAT

Buyer on deed: EAT (an entity)

Analysis: Often reportable if the transaction is non-financed and residential, unless another exemption applies

Transfer 2: EAT to Exchanger LLC

Buyer on deed: Exchanger LLC (an entity)

Analysis: Even if the deed shows “$0” consideration, it can still be reportable

Critical point: The EAT is usually not the QI. These are typically separate entities. Don’t assume the parking arrangement creates a QI exemption—test each deed transfer on its own facts.

If a Report Is Required: The Filing Process

When a transaction triggers the reporting requirement, here’s what happens:

Determine the reporting person — Use the cascade (see below) or a designation agreement to identify who’s responsible for filing.

Collect the required information — This includes details about the property, the buyer entity or trust, beneficial owners, the seller, and payment information.

Submit electronically — File through BSA E-Filing using the online form, PDF upload, or batch XML.

Meet the deadline — File by the later of 30 days after closing or the last day of the following month.

Keep records — Retain certifications received from parties and any designation agreements.

Who Is the Reporting Person?

Only one person files per reportable transfer. The rule uses a cascade—work down the list until you find someone who participated in the transaction:

#1 Closing or settlement agent named on the settlement statement

#2 Settlement statement preparer

#3 Person who files the deed with the recording office

#4 Title insurance underwriter

#5 Person who disburses the greatest amount of funds

#6 Person who evaluates title status

#7 Deed or instrument preparer

In most residential closings, the title company or settlement agent lands at position 1 or 2. But in unusual transactions—like a deed transfer out of an EAT where traditional escrow isn’t involved—you may need to look further down the list.

Common Questions

“If the QI sends the money, are we exempt?”

No, not by itself. The exemption requires the QI to be the transferee on the deed. How the funds move doesn’t determine exemption status.

“If the deed shows $0 consideration, do we skip filing?”

No. Zero-dollar consideration doesn’t automatically exempt a transfer. Run through the 30-second test like any other transaction.

“What if escrow isn’t involved on the deed out of parking?”

Someone still needs to file if the transfer is reportable. Look to whoever prepares or files the deed—they may be the reporting person under the cascade.

“Does the money source matter at all?”

Not for determining whether the 1031 exemption applies. But if a report is required, you do need to report information about the payors in the payment section of the filing.

Key Takeaways

• The deed controls. Look at who’s listed as the buyer, not where the money comes from.
• 1031 exchanges are not automatically exempt. Only a deed transfer directly to the QI qualifies.
• Reverse exchanges mean two deed transfers. Test each one separately.
• The EAT is not the QI. Don’t conflate the parking entity with the qualified intermediary.
• Seller financing and hard-money loans usually count as “non-financed.”
• When in doubt, run the 30-second test on every transfer.