The 1031 tax-free exchange may be the best page in the tax code. It has been the law since 1921 and was used by the very wealthy on large properties. Since the 1031 tax-free exchange code was simplified in 1985 it is now used by all investors with simplified paperwork and fees less than $1000. Investors can sell any type of property and replace it with any type of investment properties within six months. Oil royalties, land, condos, houses and tenant in common shares of large commercial properties are suitable replacements. Taxes are deferred with the 1031 tax-free exchange and are often never paid if the properties are passed on to the next generation, at a stepped-up basis.
1031 Tax-Free Exchange
