What is an IRC § 1031 Exchange?
An IRC § 1031 Exchange of the U.S. Income Tax Code allows
owners of investment property, whether industrial, residential,
commercial or raw land, to sell that property and defer capital
gains taxes. An IRC § 1031 Exchange gives you the opportunity
to eliminate or defer capital gains tax by exchanging the
sale proceeds, through an intermediary, for an investment
in another like-kind property or group of like-kind properties,
under a set of guidelines. You can learn more about advantages
of exchanges here.
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About the Code
An IRC § 1031 Exchange enables the seller of a given property,
and hence a person who would eventually pay capital gains tax
on the sale, to exchange it for another property or properties
of a "like-kind." For tax purposes, no gain or loss is "recognized"
by the IRS on such a transaction, so long as it otherwise complies
with applicable code provisions. Instead, the potential tax
is deferred until the new property is resold. Of course, another
IRC § 1031 Exchange could be done at this resale. There is much
more information about requirements of an exchange here. |
