1031 Exchanges Purpose & History

Dating back to 1921, 1031 Exchanges are an established part of the tax code. They allow property owners to defer taxes on capital gains by selling their appreciated real estate and buying other like-kind property instead of selling for cash and paying taxes. Provided that the property is held for either investment purposes or business use, most real estate is considered like-kind.

Section 1031 applies only to exchanges of real property and not to exchanges of personal or intangible property. An exchange of real property held primarily for sale—versus for investment purposes or business use—still does not qualify as a like-kind exchange.

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