Glossary
1031 Exchange
A tax-deferral tool that lets an investor reinvest the proceeds of a sold investment property into like-kind replacement property without immediately recognizing capital-gains tax.
Named for Section 1031 of the Internal Revenue Code, a 1031 exchange lets an investor sell an investment or business-use property and defer capital-gains tax by reinvesting the proceeds into like-kind replacement property. It requires a qualified intermediary to hold the funds and imposes two deadlines from the sale date: 45 days to identify replacement property and 180 days to close. It is a deferral, not a forgiveness, of tax — always confirm specifics with your tax advisor.