1031 Internal Revenue Code Section

Internal Revenue Code Section 1031 states that generally no gain or loss is recognized if you exchange business or investment property solely for more business or investment property of a like-kind. There are some exceptions; for example, exchanges of inventory, stocks, bonds, notes, and some types of other assets are not allowed under Section 1031. Exchanges of commercial real estate are allowed.

Personal residences do not qualify because the section is intended to cover assets held for productive use or investment only. Interests in a partnership are also not eligible. Like-kind commercial real estate exchanges need not be of the same quality of property--that is, an investment in undeveloped land may be exchanged for one in an office building.

Exchanges of real estate under Section 1031 are often called deferred exchanges or tax-deferred exchanges because capital gains are not assessed on the sale of the relinquished property. It is often said that the deferred capital gains and depreciation recapture taxes amount to an interest-free loan from the government for the purchase of more property. Such exchanges may be engaged in by investors who want to trade non-income producing property for property of equal or greater value that helps their cash flow, for example.

TM 1031 Exchange provides a variety of information in the free 1031 Tool Kit on this website that explains some of the ins and outs of 1031 exchanges. Our role is to help you find replacement property that benefits your situation. For more information on 1031 real estate exchanges, visit our 1031 contact page or call us toll free at 1-877-4TM-1031. You may also send an email here info@tm1031exchange.com.