The 1031 Exchange is a vehicle offered by the Internal Revenue Service (IRS) to avoid paying tax on each and every investment property. If properly structured the 1031 exchange allows an investor to sell a property, to reinvest the proceeds in a new property within a time certain and to defer all capital gain taxes.
IRC Section 1031 (a)(1) specifically states: “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.” It is important that An investor has a good understanding of the Code or uses a professional that can help guide them through the process. Our underwriter Old Republic Title has a specialized 1031 Division to help with this intricate understanding of the Code. For a fee they can help investors with all the proper planning to make the 1031 Exchange easy to understand and successful in deferring capital gains tax.