Posted by J.Hyre in Ohio on November 05, 1998 at 11:01:18:
Usually when you sell property, you pay tax on any appreciation. A 1031 Exchange, aka Like-Kind Exchange, is different. Under Section 1031 of the Internal Revenue Code, if you exchange property for like-kind property, you defer taxes until when you sell the property received.
For example: If you owned 30 single family homes currently worth $650,000 and purchased them for $300,000 ten years ago, you could either sell the homes & pay taxes of $61,000 to $150,000 on the $350,000 gain OR exchange the houses for other real property like a plot of land or an easy-to-manage building. The exchange would be tax-free and you would pay no taxes until you sold the plot or the building.