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What is a tax-deferred exchange? |
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A tax-deferred exchange is a transaction involving trade, business, or investment property, which, because it meets the requirements of Section 1031 of the Internal Revenue Code, qualifies for non-recognition of gain or loss. It's a technique for deferring gain on the sale of property by re-investing the proceeds of the sale in "like-kind" property. The theory is that if one does not cash out of an investment (having rolled over proceeds into new like-kind property), the economic gain has not been realized in a way that produces the cash to pay the tax, and so no tax should accrue.
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