The Tax-Deferred 1031 Exchange

The tax deffered exchange, as defined in Section 1031 of the Internal Revenue Code of 1986, offers real estate investors one of the last great investment opportunities to build wealth and save taxes. By completing an exchange, the investors (Exchanger) can dispose of their investment property, use all of the equity to acquire replacement investment property, defer the capital gains tax that would ordinarily be paid and leverage all of their equity into the replacement property. Two requirements must be met to defer the capital gains tax: (a) the Exchanger must acquire "like kind" replacement property and (b) the Exchanger cannot receive cash or other benefits (unless the Exchanger pays capital gains taxes on this money).