What is a Tax-Free Exchange?

A “1031 exchange” or “tax-free exchange” is an exchange of real or personal property structured under Section 1031 of the Internal Revenue Code that allows owners of investment property or property held for productive use in a trade or business to defer the recognition of capital gains taxes associated with the sale of investment or business property by reinvesting the equity from the sale of business or investment property into other “like-kind” property of equal or greater value.