A 1031 Exchange goes by many different names, such as - Like Kind Exchange, Tax Deferred Exchange, Real Estate Exchange, Deferred Real Estate Trade, Starker Exchange and many other names.
What ever you call it, the true definition is when persons or businesses who own real estate investment property sells their property and takes the proceeds and buys other like kind property(s), thus deferring the Capital Gains Tax. Any proceeds not used to purchase the new like kind real estate investment property is taxed as a cash sale.
Section 1.1031 of the Internal Revenue Code laid out the rules in the summer of 1990 of how turning a sale and a purchase of like kind investment property is classified as an exchange.
These "exchanges or trades" depending on your terminology does have a set of IRS rules you must follow, but the overall value is great if the transaction is done properly. Please note: Usually your personal residence does not qualify as a 1031 Exchange candidate. We suggest you contact your attorney and tax accountant for full information on exchanges.
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