What is a 1031 Exchange?
Generally, when you sell real estate, you have to pay tax on the gain from the sale of your property. This gain is caused either by the property appreciating over time or by taking depreciation deductions for tax purposes.

A Section 1031 Exchange, named for the Internal Revenue Code Section, offers you the major exception to defer this capital gains tax. With a 1031 Exchange, when you sell business or investment real estate and replace it with a like-kind investment property, you can defer the payment of the tax that is normally due on the sale.

If your objective is to use the proceeds from the sale of your property to buy more business or investment real estate, a 1031 Exchange can provide you with more funds for investment than can be achieved through the investment of after-tax proceeds from the sale of your current property.