What is it, and is it possible to sell property without paying capital gains tax?
– Peter from Knoxville, TN In a typical transaction, the seller is taxed on any gain or profit that is realized from the sale. However, through a little known section of the ta ยป more In a typical transaction, the seller is taxed on any gain or profit that is realized from the sale. However, through a little known section of the tax code (often referred to as a 1031 Exchange), the tax on the gain/profit is deferred until some future date. Section 1031 of the IRS Code provides that no gain shall be taxed on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more properties for one or more replacement properties of “like-kind”, while deferring the payment of federal income taxes and some state taxes on the transaction. The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized
