Tax-deferred exchange

Under section 1031 of the federal tax code, investors may defer capital-gains taxes on a qualifying exchange of “like-kind” properties exchanged for business or investment purposes. Normally, when investors sell real property they pay tax on their gain at the time of the sale. But Section 1031 lets investors defer that tax if they re-invest the gain into a “like-kind” property. The IRS defines “like-kind” property as property of the same nature, character, or class. Most real property is considered “like-kind” to other real estate.