1031 or “Like-Kind” Exchanges

A 1031 or “like-kind” exchange is a way for owners of business and investment real estate to sell property and buy other “like” property without paying the Capital Gains Tax upon the sale. Section 1031 of the Internal Revenue Code lays out in detail the procedure for completing a sale and purchase in accordance with the rules and time frames which will qualify as a tax deferred exchange.

This type of exchange can be a useful vehicle for savings if you are thinking of, for example, selling a piece of land and buying a rental property. The exchange rules must be followed carefully which involves forethought and planning in consultation with your accountant, your Realtor, settlement agent and exchange agent.