The "1031 Exchange"
Section 1031 of the Internal Revenue Code provides for the deferment of taxes on the exchange of "Like-kind" property. Like-kind property includes most real estate and other property that is of the same nature or character.
If a taxpayer sells or transfers property, identifies a replacement property within 45 days and receives the replacement property within 180 days of his/her tax return due date, then taxes on any gains on the sale of the relinquished property are deferred. The main qualification for this tax deferment is that the taxpayer may not receive cash and then use the proceeds to buy the replacement property.
The transferor is not considered to have received cash if the transaction involves Qualifying Security Arrangements, Qualified Escrow Accounts or Trusts, A Qualified Intermediary, or Payment of Interest or a Growth Factor.
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