What is a 1031 tax-deferred exchange?
A 1031 Tax Exchange is a popular means to defer paying taxes when a ”qualifying” property is sold AND another purchased. However, if the replacement property is ever sold outside of a 1031 Exchange, the ”deferred” gain (net proceeds) and any additional gain is subject to taxation. The premise is that if net proceeds are reinvested then the profit is only on paper and therefore the seller should not be taxed until real money is pocketed.
