What is a 1031 Exchange?

A Tax-Deferred Exchange was first introduced in 1921 allowing owners of investment property to defer the payment of capital gains associated with the sale of those properties. In the summer of 1990, this procedure was finally outlined under the Internal Revenue Code section 1031, and involves a series of rules and regulations that must be met in order to take full advantage of this tax benefit.

These new rules allowed owners of certain types of like kind Real and Personal property to sell their property and other like-kind property without paying the Capital Gains Tax. The rule also required that the "Exchanger" use a safe harbor to hold the proceeds while the exchange was in progress, and spelled out what the safe harbors were.

The only safe harbor for most "Exchangers" is a "Qualified Intermediary." A Qualified Intermediary has a complete understanding of everything that is involved in utilizing this section of the code and will walk you through this process.