A “1031 exchange” refers to a means of deferring tax on the sale of an interest in real property allowed under section 1031 of the Internal Revenue Code.
In short, it allows a seller to defer tax on a gain that would otherwise be realized on a sale of property if the proceeds from the sale were reinvested in like-kind property.
It’s quite common for a 1031 exchange to be involved in some manner in an investment real estate transaction. A seller must contractually arrange to convey his or her interest in the property being sold in exchange for receiving an interest in another piece of property.
Because the rules for a 1031 exchange are complex, Progressive Escrow always advises Seller’s to seek professional advice from your CPA or Attorney.
