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About 1031 Exchanges and How to Defer Capital Gains Tax

1031 Exchanges are a great way to defer paying capital gains taxes and avoid losing money when selling property.

What Is a 1031 Exchange?

A 1031 Exchange is a way to defer paying federal—and possibly state—capital gains taxes on property sales. How? By exchanging the property for a similar (or like-kind) property rather than selling it outright.

1031 Exchanges Are Also Known as Like-Kind Exchanges

1031 Exchanges fall under Section 1031 of the Internal Revenue Code and can be used for a range of real and personal property.

  • Real estate is like-kind with real estate—farms, ranches, residences, commercial properties, are all like kind.

The exchanger—you—get a window of time to find and purchase similar property. A Qualified Intermediary—Exchange Services, LLC—holds the funds from the sale of your original property in a Qualified Trust Account until you find a replacement property or properties.