Considering a 1031 Exchange? The Rules You Need to Know

Investing in real estate can be a highly profitable enterprise. Unfortunately, real estate investors know that it comes with the same cost as most other forms of investment: taxes. Fortunately, unless Congress changes the 1031 rules, which have been in existence for more than 100 years, there is a way for savvy real estate investors to defer payment of capital gains taxes indefinitely: the 1031 exchange.

Named after the section of the Internal Revenue Code that defines its many rules and regulations, the 1031 exchange permits an investor to defer tax payment by following a series of strict rules. What follows is a list of what you need to know in order to take full advantage of a 1031 exchange.

1. 1031 Exchanges Are Also Known as ‘Like-Kind’ Exchanges, and That Matters.