Is it possible to defer paying capital gains taxes indefinitely?
Yes. There is no limit to the number of 1031 exchanges that a taxpayer can participate in. Taxpayer can continue to defer capital gains taxes by either further exchanging the replacement property for another like-kind property, or by holding on to it, until the taxpayer dies. The taxpayer’s estate will not have to pay capital gains tax on the deferred gain. There will be a step up in basis to the market value of the property at the taxpayer’s date of death. Later, when the estate or heirs sell the property, they will only pay tax on the increase in value after the taxpayer’s death.
