WHAT IS A 1031 TAX-DEFERRED EXCHANGE?

When a property used for investment or business is sold, Internal Revenue Code Section 1031 provides the seller with a way to defer the payment of capital gains tax if the property sold is replaced with a "like-kind" property. (This transaction is also known as a Starker Exchange or a Like-Kind Exchange). If the exchange is structured properly, the taxpayer can defer payment of the capital gains taxes that would normally be imposed.

Internal Revenue Code 1031(a) (1) states that "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."

HOW DOES IT WORK?

NOTE: The content of this website is informational only. It does not constitute tax, legal or accounting advice. Each situation is different and you are advised to seek appropriate professional advice to see if a 1031 Exchange meets your needs.