1031 Exchange in Portland: Selling in Oregon, Buying Somewhere Else

If you exchange Oregon property for property in another state, Oregon keeps track of the gain you deferred. You file Form OR-24 every year until you dispose of the replacement property. Here is what to set up at closing so the follow-up is easy.

The short answer

A 1031 exchange can defer federal tax on the gain from selling Portland investment property, and Oregon generally follows that deferral. But when the replacement property is outside Oregon, Oregon asks you to file Form OR-24 for the year of the exchange and every year after, until you dispose of the replacement property. When that later taxable sale happens, Oregon law adds the deferred Oregon gain back to Oregon income (ORS 316.738). Separately, if you are not an Oregon resident when you sell, the closing agent may have to withhold part of what is paid to you.

Where are you in the process?

• Selling first. Set up the exchange before closing: a qualified intermediary, an exchange agreement, the sale contract assigned with written notice to all parties, and closing instructions sending the proceeds to the intermediary (Treas. Reg. §1.1031(k)-1(g)(4)). If you're not an Oregon resident, tell the escrow officer early so withholding is worked out on the right basis.
• Buying first. A reverse exchange needs an exchange accommodation titleholder (Rev. Proc. 2000-37). See reverse 1031 exchanges.
• Already closed and received the money. Actual or constructive receipt turns the transaction into a sale (§1.1031(k)-1(f)). Talk to your CPA.

Educational next steps, not an eligibility determination.

What Oregon expects after an out-of-state exchange

The OR-24 instructions say: "You must file this form for the tax year that you transferred property to another party in a like-kind exchange and annually thereafter until the disposition of the like-kind property." The form is only for exchanging Oregon business or investment property for property outside Oregon; it is not used when both properties are in Oregon.

In practice:

• Oregon does not tax the exchange when it happens. It keeps a record of the Oregon gain you deferred.
• When you later sell the out-of-state property in a taxable sale, ORS 316.738 adds an amount back to Oregon income. That can be years later, and it can apply even if you no longer live in Oregon. The statute sets the formula, so have your CPA compute the amount rather than estimating it.
• The real burden is records: your basis, the deferred gain, and the replacement property's details, kept for as long as you own it.

If you are not an Oregon resident when you sell

For a nonresident seller, the closing agent must withhold the least of 4% of the price, the net proceeds of the sale, or 8% of the gain included in Oregon taxable income. There are exceptions, including sales of $100,000 or less (ORS 314.258). There is no blanket exemption for 1031 exchanges. In the Department of Revenue's own example, the escrow agent sends the exchange funds to a qualified intermediary and treats only the amount actually paid to the seller as net proceeds (OR-18-WC instructions). Withholding is a prepayment you claim on your Oregon return, not a final tax. Oregon residents are not subject to it.

Local taxes at a Portland closing

Oregon law bars cities and counties from adopting new real estate transfer taxes, keeping only those in effect on March 31, 1997 (ORS 306.815). Washington County (Beaverton, Hillsboro, Tigard) has one; we found none for Portland or Multnomah County. Your title company will confirm the costs for your sale.

Metro's Supportive Housing Services tax and Multnomah County's Preschool for All tax are income taxes based on Oregon taxable income, not taxes on the sale itself. Gain you actually recognize, such as boot or a later taxable sale, is part of that income. Ask your CPA how they apply to your exchange.

The federal clocks

45 days to identify, in writing; then receive the replacement by the earlier of day 180 or your return due date including extensions (26 U.S.C. §1031(a)(3)). If you are buying in another state you are often searching from a distance, so the 45 days are tighter than they look. Start before closing, and count your dates in the deadline calculator.

Oregon's exchange-facilitator law: what to ask any intermediary

Oregon's statute requires an exchange facilitator to keep a fidelity bond of at least $1 million (or a $1 million deposit, or to hold exchange funds in a qualified escrow or trust that needs both your and the facilitator's written authorization for withdrawals) and errors-and-omissions coverage of at least $250,000 (or an alternative). It must also act as custodian of your funds under a prudent-investor standard and not mix them with its operating accounts (ORS 673.810). Oregon does not license intermediaries. Ask your intermediary which option it uses, and for the certificates.

Before closing: an Oregon sale with an out-of-state replacement

Watch

General rule explainer — not recorded for Portland

It's Not Six Months. It's 180 Days. · 23 seconds

The exchange period ends on the earlier of day 180 or your tax return due date, including extensions. The clip covers federal timing only; OR-24 and Oregon withholding are covered in the text above.

A hypothetical sequence

Hypothetical — not a client and not a result. An owner who moved from Portland to Arizona two years ago still owns a Portland fourplex and wants to sell it and buy a rental near her new home. Because she is no longer an Oregon resident, the escrow officer raises Oregon withholding. The exchange is set up before closing, so the proceeds go to the intermediary and only cash paid to her would count as net proceeds. After the exchange she files Form OR-24 for that year and each year after, and keeps her basis records, because when she eventually sells the Arizona rental in a taxable sale, Oregon will look for the deferred Oregon gain. Every figure depends on her own facts and her CPA's calculations.

Frequently asked questions

Do I have to file anything with Oregon if my replacement property is in another state?

Yes. Oregon's instructions require Form OR-24 for the year you transferred the Oregon property in a like-kind exchange, and every year after that until you dispose of the out-of-state replacement property.

Will Oregon tax me later if I've moved away?

ORS 316.738 adds an amount to Oregon taxable income when the out-of-state replacement property is sold in a transaction where gain is recognized, so moving does not by itself end Oregon's interest. Your CPA should calculate the amount.

Is a 1031 exchange exempt from Oregon's nonresident withholding?

There is no blanket exemption. Withholding is the least of 4% of the price, the net proceeds, or 8% of the Oregon gain, and in the Department of Revenue's example, exchange funds sent to the intermediary are not net proceeds paid to you (ORS 314.258; OR-18-WC instructions).

Does OR-24 apply if I buy the replacement in Oregon?

No. The form is only for Oregon property exchanged for property outside Oregon.

Does Oregon regulate 1031 intermediaries?

Oregon's exchange-facilitator statute (ORS 673.800 to 673.825) sets bond or protected-account, errors-and-omissions and custody requirements. It does not create a license.

Who you'll work with

Leah Badach is a Certified Exchange Specialist with 11+ years of 1031 exchange experience. Standard, reverse and improvement exchanges are all available. Before you sign, Leah confirms in writing which qualified intermediary will hold your funds and gives you its account, bond and insurance documents. The intermediary, not Leah personally, signs the exchange agreement and holds the funds, so ask it for its bond or escrow and E&O evidence in writing. You can verify the credential in the FEA CES directory.

Related: 1031 exchanges in Oregon · Buying replacement property out of state · Which states recognize 1031 exchanges · Form 8824 · 1031 exchange timeline · Questions to ask any qualified intermediary

Sources

• Oregon Form OR-24 instructions: annual filing for Oregon property exchanged for property outside Oregon.
• ORS chapter 316: §316.738, the add-back when the replacement property is later sold.
• ORS chapter 314: §314.258, withholding on nonresident sellers.
• OR-18-WC instructions: how withholding works when proceeds go to a qualified intermediary.
• ORS chapter 306: §306.815, the limit on local real estate transfer taxes.
• City of Portland Revenue Division, personal taxes: Metro SHS and Multnomah County PFA income taxes.
• ORS chapter 673: §§673.800 to 673.825, exchange facilitators.
• 26 U.S.C. §1031 and Treas. Reg. §1.1031(k)-1: the federal rules, the 45- and 180-day periods, and receipt of funds.
• Rev. Proc. 2000-37: reverse exchanges.

Educational information, not tax or legal advice.