Capital Gains Tax Solutions Podcast The "Debt Trap": How 1031 Exchanges are Sinking Real Estate Deals in 2026
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Mar 23, 2026 Glenn Hanson, founder and CEO of Colony Hills Capital and veteran real estate investor, shares why 1031 exchanges are creating a debt trap in 2026. He discusses timing and debt-replacement pitfalls. Listeners hear a Sacramento case study, ways to use a Deferred Sales Trust for flexible investments, combining strategies, and how trusts can partner on deals and address estate tax risk.
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How 1031 Rules Inflate Deals And Create Debt Risk
- 1031 exchanges force rushed reinvestment and replacement of equal or greater debt, which can inflate prices and saddle buyers with high-interest debt.
- Brett Swarts ties inflated 2021–2022 valuations to tax-driven demand and warns rising rates made those debt-replacement rules a deal killer.
Use A Deferred Sales Trust To Escape 1031 Constraints
- Do consider using an IRC 453 installment sale via a Deferred Sales Trust to eliminate 1031 timing and debt-replacement constraints.
- Brett explains the trust removes 45/180-day pressures and allows reinvestment into any asset type or money market while deferring tax.
Sacramento Multifamily Sale Saved A Million In Taxes
- Warren and Catherine sold a Sacramento multifamily for $2.5M and avoided a roughly $1M tax bill by using the trust and installment sale structure.
- The trust bought then sold to the buyer, issued a promissory note, and parked proceeds at Charles Schwab for reinvestment.