InvestingAll terms starting with a number
1031 exchange
Also called: like kind exchange, 1031
A tax provision allowing capital gains deferral when investment property is exchanged for other like-kind investment property.
A 1031 exchange defers capital gains tax when proceeds are reinvested into qualifying replacement property under strict rules, including identification and closing deadlines and the use of a qualified intermediary.
The deadlines are unforgiving and the proceeds generally cannot touch your hands. It defers tax rather than eliminating it.
Related terms
- DepreciationA tax deduction that lets an owner write off the cost of a rental building over a set recovery period.
- AppreciationAn increase in a property’s value over time, from market movement or from improvements made to it.
- Opportunity zoneA designated area where qualifying long-term investments can receive preferential capital gains treatment.
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