Many sellers of business or investment property continue to benefit from Internal Revenue Code (“IRC”) Section 1031, which provides that gains on the sale of this property are deferred as long as the proceeds are similarly reinvested. The inherent gain is not taxed; rather, the built-in appreciation is carried over to the successor property. The result is that the property owner avoids the payment of gains tax until the property is eventually sold outright.
Despite many, many changes in the IRC, particularly in recent years, this provision has remained largely unchanged since 1924. Given the popularity of this rule among those who use it regularly – particularly the real estate industry – it is hard to imagine that the like-kind exchange is due for repeal. See the complete report here: Like-Kind Exchange (updated 1-15-18).