What is an IRC Section 1031 Tax-Deferred Exchange?
A. If the taxpayer sells an investment property, the taxpayer pays tax on the recognized gain. However, if the taxpayer completes a 1031 exchange on that property, it will allow the taxpayer to exchange property on a tax-deferred basis within a specific statutory mandated time period. In an exchange, the property held must be a property held for investment or used in a trade or business. There will be no gain or loss recognized in an exchange. The taxpayer must trade even or up in value and trade even or up in equity.