A tax deferred exchange or “like kind” exchange is a method of disposing of and reinvesting funds from investment or business-use assets while deferring capital gains and recapture taxes. To successfully complete a like kind exchange, timing is extremely important and the assistance of experienced counsel is highly recommended.
The like kind exchange benefits are created by Internal Revenue Code Section 1031. So the process is often called a “1031 Exchange”. Before discussing the basics of the transaction, it is important to understand the nomenclature. The “Exchanger” is the person or entity that is selling and buying like kind property. The property being sold is called the “Relinquished Property” and the property being purchased is the “Replacement Property”. Continue reading