What is a 1031 Tax-Free Exchange?
If youre reluctant to sell a farm because of potential capital gains taxes, you might want to consider a 1031 tax-free exchange. Heres how it works. If you sell a property owned for investment or business and the money you make from the sale is used to purchase a like property, you may avoid capital gains taxes. So what is considered a like property? Real estate held for trade or business or investment can be exchanged for real estate held for trade or business or investment. Examples include a farm for a farm, commercial real estate for a farm, apartments for a farm, a car wash for a farm or vice versa. You must identify a new property to buy within 45 days after the property you are selling is closed. The replacement property must be acquired within 180 days of closing on the sale of the first transaction.
