Section 1031
Section 1031 is the provision in the Internal Revenue Code that authorizes tax-deferred like-kind exchanges of investment real estate.
What it means
Section 1031 of the Internal Revenue Code (26 U.S.C. § 1031) is the statutory basis for what most practitioners call a "1031 exchange." The section permits no gain or loss to be recognized on the exchange of real property held for productive use in a trade or business or for investment, when that property is exchanged solely for real property of like kind.
The Tax Cuts and Jobs Act of 2017 narrowed Section 1031 to real property only. Prior to 2018, tangible personal property (aircraft, equipment, collectibles) could also qualify; it no longer does. Real estate remains the last major asset class with this deferral mechanism.
The statute itself is short; the operative mechanics (45-day identification, 180-day close, safe harbor for QIs) come from Treasury regulations and IRS revenue procedures, principally the 1991 "deferred exchange" safe harbor in Treas. Reg. § 1.1031(k)-1.
Related terms
Keep reading
Sources