What is a tax-deferred or 1031 Exchange?
Internal Revenue Code section 1031 provides that no gain or loss shall be recognized on the exchange of any type of business use or investment property for any other business use or investment property. 1031 Exchanges are not really exchanges in the context of two-party barter. Instead, they are typical sales and purchases that involve the same exact ingredients as any other sale or purchase, without the capital gains. The only real difference is the investor is increasing regulations. No other aspects of the transaction are affected.