Many real estate buyers take advantage of the 1031 Exchange, a real estate investment technique that enables sellers of income property to defer paying capital gains taxes.
1031 Exchanges and the IRS
According to the 1984 Congressional Tax Reform Act, owners can sell an income property and defer capital gains tax by identifying a “like-kind” exchange property within 45 days and then reinvesting the profits within 180 days.
Current 1031 Exchange Requirements
By 1986, an increase in capital gains taxes had re-ignited interest in 1031 Exchanges. In 2002, the IRS issued new guidelines on how a group of buyers can pool their equity and acquire larger properties, and each still satisfy their individual 1031 Exchange requirements and defer capital gains taxes.