What is a 1033 Exchange?
A 1033 tax exchange, as outlined in Section 1033 of the Internal Revenue Code, allows taxpayers to defer capital gains taxes when they experience involuntary property conversions or losses due to events like natural disasters, theft, or condemnation. Rather than recognizing immediate gains, taxpayers can reinvest the proceeds from the involuntary conversion into similar property, thereby postponing tax liabilities. This provision serves as a crucial tool for individuals and businesses to recover from unexpected property losses without facing immediate tax consequences.