What is a 1031 Exchange?
A 1031 tax exchange, also known as a like-kind exchange, is a tax-deferred transaction authorized by the Internal Revenue Code (IRC) section 1031. It allows investors to sell one investment property and reinvest the proceeds into another similar property without immediately paying capital gains taxes on the profit. This strategy enables investors to defer capital gains taxes, potentially allowing them to reinvest more capital into a new property and diversify their real estate portfolio.