What is a 1031 Exchange?
A 1031 exchange takes its name from Section 1031 of the Internal Revenue Code. It lets real estate investors sell an investment property and defer the capital gains tax, as long as they roll the proceeds into a like-kind replacement property of equal or greater value. Done right, it keeps more of your money working in the next investment instead of going to the IRS.
Key points
- A 1031 exchange is named after Section 1031 of the Internal Revenue Code.
- It applies to real estate held for investment or business use.
- It lets you defer capital gains tax when you sell and reinvest the proceeds.
- The replacement property must be of equal or greater value.
Learn more
See the benefits of a 1031 exchange, or start an exchange with a qualified intermediary.
Full transcript
It’s a very good question. A 1031 exchange comes from Section 1031 of the Internal Revenue Code, which allows owners of investment real estate that have held the property, typically for long periods of time, to sell the property and defer capital gains from the sale into a replacement property of equal or higher value.