What is an IRC 1031 Tax Deferred Exchange?
A 1031 Exchange, is a transaction which specifies if an asset (usually some form of real estate such as land or a building) is sold and the proceeds of the sale are the reinvested in an asset of a similar kind, therefore no capital gain or loss is recognized, allowing the deferment of capital gains taxes that would otherwise have been due on the first sale. The actual law is Title 26, section 1031 of the Internal Revenue Code. In plain English, this means that a 1031 Exchange is a rollover of equity of like properties, rather than an avoidance of tax. There are 3 important parts that are important for a smooth and successful 1031 Exchange: 1. Time Requirements 2. Identification Rules 3.
