Generally a Contract for Deed, Land Contract or Contract for Sale mean the same thing, but not always, so its important you pay close attention to the way the way the legal document has been drafted. And make sure the terminology you are using in the document is appropriate to the geographic area where the real property is located.

Right to Own, Use, Possess the Real Property (Benefits and Burdens of Ownership)

For a 1031 exchange to be allowable in the case of a Contract for Deed transaction we need to determine when the rights of ownership actually transfer to the buyer. Do the rights to own, use and possess the property transfer upfront upon execution of the contract or at the back end when the Contract for Deed is actually paid off by the buyer?

Commonly we find that Contract for Deed transactions result in the immediate sale and transfer of rights to the real property to the buyer up front and provides and provides for financing or payments over a period of time. Legal title to the property is retained by the seller as a security device rather than a recorded lien against the title, but the buyer does have all the benefits and burdens of ownership and has the right to own, use and possess the property as he or she sees fit.

However, there are some contracts that do not transfer all the rights to the real property until the backend of the transaction when the debt is paid in full by the buyer. This is why you must be careful to read the contract and understand what rights are being transferred and when the rights are transferred to the buyer. You should consult with your legal and tax advisors to make sure you know exactly what affect your contract with have on your 1031 exchange.