Section 1031 exchange
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Definition
Defers gain on like-kind real property exchanges when proceeds are properly reinvested under the statute.
Section 1031 exchange in plain English
An investor swaps one rental building for another and assumes the entire gain disappears forever. Section 1031 defers gain on like-kind real property exchanges when proceeds are properly reinvested under the statute. Cash, non-like-kind property, or net debt relief is boot and can trigger recognition even inside an otherwise qualifying exchange. Computing deferred gain correctly while missing boot is still the wrong answer on a recognition question.
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