What Is a 1031 Exchange?

A 1031 Exchange, named after Section 1031 of the Internal Revenue Code (IRC 1031), is a powerful tax-deferral strategy for U.S. taxpayers. It allows property owners to sell real estate held for investment or business use and defer paying capital gains taxes and depreciation recapture, as long as the proceeds are reinvested into a like-kind property.

This provision helps investors maximize their real estate portfolio by:

According to IRC 1031, no gain or loss is recognized if a property held for investment or productive use in a trade or business is exchanged for another like-kind property with a similar purpose.

In Summary