1031 Exchange and 721 Exchange allow you to defer capital gains when you sell an investment. But there are some important differences.
What is 721 Exchange?
A Section 721 Exchange lets you contribute property and/or financial assets to a partnership or fund (e.g. an LLC taxed as a partnership). In return, you gain ownership interests — or units — in the fund. By doing this, you defer the capital gains tax because you aren't selling your assets. You're contributing them to the fund.
You can contribute a range of property to a 721 Exchange: Publicly traded shares, crypto, real estate, or cash all qualify as long as they're accepted by the fund. Just keep in mind that you can only contribute property held for investment or business purposes.
Craft Pod is a 721 Exchange fund. You contribute assets to the fund and receive ownership units. We manage the assets (for example, private jets) in the fund. By contributing to the fund, you get private jet access — the more you contribute, the more flight hours you unlock. With Craft Pod you defer capital gains taxes. AND you take control of your air travel.
What is a 1031 Exchange?
A Section 1031 Exchange lets you exchange one real estate asset in the US for another real estate asset in the US. When doing this, you can defer the capital gains taxes you would be liable for from the sale.
To be eligible, the property you're selling needs to be in the USA and used in business or held for investment (or in IRS-speak, a like-kind property). This means you can't defer tax on the sale of a property that's used solely as your personal residence. And the property you're buying must also be in the USA.
A like-kind property doesn't mean it needs to be similar in grade or quality. It means it needs to be used for business or held as an investment.
There are strict time limits. You must identify the next property within 45 days of selling the first. And the swap must be completed within 180 days. You need to use a Qualified Intermediary, too. The IRS doesn't want you touching the cash before the swap goes through.
Financial assets like stocks and crypto, and private aircraft do not qualify for 1031 exchange.
Key differences
| 721 Exchange | 1031 Exchange |
Asset type | Wide range including real estate, crypto, stocks, and cash. | Limited to real estate assets. |
Ownership results | You exchange property for ownership units in a fund. | You exchange real estate for another property you own directly. |
Time limits | No IRS-set limits but contributions depend on the fund's schedule. | Must identify within 45 days and close within 180 days. |
Flexibility | Your gains are deferred until you sell your units. | Gains are deferred until you sell the replacement property. |
If you want diversification, stability, and private jet access, a 721 Exchange makes the most sense.
To defer your capital gains and get private jet access, check out Craft Pod 721 Exchange. You contribute your stocks or cash into the fund. You defer your capital gains. You receive partnership units.
Craft Pod buys and manages a fleet of private jets, claims bonus deprecation, and allocates flight hours to you.
Please read our full disclosures before making an investment decision.
Ready to take the next step?
Talk with your CPA to confirm which exchange rule is best for you and your assets. For more on how 721 operates inside Craft, read the article on deferring capital gains when you contribute appreciated stock.