When an investor sells investment real estate for a gain, capital gains tax is due in conjunction with the sale. A 1031 real estate exchange, sometimes known as a 1031x or a tax-deferred, like-kind exchange, offers investors the opportunity to defer payment of capital gains taxes on the turnkey investment property gains under certain conditions by exchanging, or purchasing, like-kind replacement properties.
What is a 1031 Exchange? A 1031 exchange is a tax strategy under Section 1031 of the internal revenue code. You can do a like kind exchange for 1031 exchange properties, investment properties or replacement properties.