INVESTOR  INFORMATION:  Essentials of Exchanges for Investors  

What is a 1031 Exchange?

 The Internal Revenue Code, Section 1031, is the section that allows for the deferral of gain where a transfer of properties occurs at different times.  The properties must be used in a trade or business or as investment properties.   In other words, if you sell a piece of property that is not a personal residence, then reinvest the money within the 180-day replacement period in another piece of qualifying property (not your personal residence), then there may be little or no tax due at that time.

These provisions in the law have been around in various forms nearly as long as the income tax itself.  They are not tax “loopholes” but rather a method of deferring taxes when a taxpayer does not receive any cash equity or debt relief.  You are still in control of your real estate dealings, but for very little effort or cost, you can take advantage of one of the last real estate tax shelters available by using a "Qualified Intermediary."