Many authors have commented on the compliance risk associated with tax-deferred exchanges. However, no published studies explicitly address whether the risks associated with the exchange process impacts the price at which exchanged assets trade. Using a unique data set that separates buy and sell side transactions for non-direct exchanges, this study examines the price impact of tax-deferred exchanges on apartment transactions in the Phoenix, Arizona market. Consistent with the price pressure hypothesis originally developed by Scholes (1972) and Kraus and Stoll (1972), the data show that exchange participants pay an economically significant premium to acquire replacement assets. A conventional hedonic price index is generated to investigate the rational bounds of the exchange premium. While the impact of an exchange is large, the premium is within the rational bounds.