In real estate, an Exchange is the reciprocal transfer of real property between parties, rather than a traditional sale. This type of transaction is often structured to qualify for special tax treatment that allows the deferral of capital gains taxes.
Commonly known as a 1031 exchange, after the applicable section of the Internal Revenue Code, this process allows an investor to defer taxes by reinvesting the proceeds from one property into another like kind property. To qualify, strict rules and timelines must be followed, including the use of a qualified intermediary and adherence to identification and closing deadlines.
