1031 Exchanges - How They Work
In commercial real estate, a 1031 Exchange—named after Section 1031 of the Internal Revenue Code—allows investors to defer paying capital gains taxes when they sell a property, as long as they reinvest the proceeds into a similar, or “like-kind,” property. This tool is especially valuable for investors seeking to grow their portfolio or reallocate assets without triggering an immediate tax liability. The like-kind requirement is broad, meaning an office building, warehouse, retail space, or even undeveloped land can typically be exchanged for another type of commercial property, as long as both are held for investment or productive use in a trade or business.