BASICS

What Is A 1031 Exchange?

An educational overview of Section 1031 like-kind exchanges and how investors use them to defer capital gains taxes.

What Is A 1031 Exchange?

A 1031 exchange — named after Section 1031 of the Internal Revenue Code — is a transaction that allows an investor to defer federal capital gains tax when selling investment or business real estate and reinvesting the proceeds into "like-kind" replacement property.

Key educational concepts

Like-kind: Real estate held for investment or productive business use generally qualifies as like-kind to other U.S. real estate held for investment.
Qualified Intermediary (QI): A neutral third party who holds the sale proceeds so the investor never has "constructive receipt" of the funds.
45-day identification window: Replacement property must be identified in writing within 45 days of the relinquished-property closing.
180-day exchange window: The replacement-property purchase must close within 180 days of the relinquished sale.

What 1031 does NOT do

A 1031 exchange defers, not eliminates, federal tax. It is also not a way to avoid state tax in every state. Always work with a CPA and attorney.

This page is educational only. Not tax, legal, or investment advice.

Frequently asked questions

Is a 1031 exchange a way to avoid taxes forever?

No. A 1031 exchange defers federal capital gains tax; it does not eliminate it. Estate planning techniques may affect long-term outcomes.

Does a primary residence qualify?

Generally no. Section 1031 applies to property held for investment or productive business use, not personal residences.

Educational information only. The content on this page is general education and is not tax, legal, accounting, or investment advice. Consult your own CPA, attorney, and licensed investment professionals before making any decision related to a 1031 exchange or Delaware Statutory Trust.

basics

What Is A 1031 Exchange?