Section 1031 Exchanges: A Wealth-Building Tool (The Scanlon Report‪)‬

Nothing in life is really free, but for real estate investors the next best thing is being able to defer paying taxes due on the sale of real estate. For almost 100 years, the Internal Revenue Code has included a provision called Section 1031 that allows investors to exchange their investment in one asset for another one, while deferring the payment of taxes until the ultimate disposition of the replacement asset. This process can be repeated as many times as the taxpayer wants. In many cases, taxpayers hold replacement property until they die, allowing their heirs to inherit the property without having to pay any capital gains taxes.