What Is A 1031 Exchange In Real Estate?

Real estate investors have an added advantage of being able to sell property and trade up to something else and delay the payment of capital gains tax on the property they sold.  This is called a 1031 exchange.  Named for a section of the IRS tax code a 1031 exchange allows real estate investors the opportunity to expand or grow their real estate holdings and defer the payment of taxes.  Just as with anything tax related following the rules closely is a must to qualify.  If a real estate investor happens to miss a deadline or allow the wrong party to hold the proceeds from a sale the entire transaction could be subject to taxation so it is worthwhile to work with professionals who know how to handle a 1031 transaction.