1031 Exchange

Real Estate

A 1031 exchange (like-kind exchange) allows real estate investors to defer capital gains taxes by reinvesting proceeds into similar property. Strict rules: 45 days to identify replacement property, 180 days to close. Both properties must be held for investment or business use (not personal residence). The deferred gain rolls into the new property's basis. The 2017 tax reform restricted 1031 to real estate only. Enables indefinite tax deferral — investors pyramid wealth and pass to heirs at stepped-up basis, never paying deferred tax. Use a Qualified Intermediary; touching the cash voids the exchange. Powerful tax strategy for serious real estate investors.