1031 exchange
Real EstateDefinition
Section of the US tax code allowing investors to defer capital gains tax when selling investment real estate by reinvesting proceeds into a "like-kind" replacement property within 180 days.
Restricted to investment/business real estate (residences don't qualify). Step-up at death + 1031 lets RE investors compound gains tax-free for life. Periodically threatened in Congressional reform proposals but has survived every cycle.
Restricted to investment/business real estate (residences don't qualify). Step-up at death + 1031 lets RE investors compound gains tax-free for life. Periodically threatened in Congressional reform proposals but has survived every cycle.
Example
Sell apartment building for $1M with $400K of gains. Identify replacement within 45 days, close within 180 days. No capital gains tax now; basis carries over to new property. Repeat for decades, then die — heirs get step-up + zero gains tax. Buffett's method.
Related tool
Open the realestate tool on Arsenal.finance →