Submitted by Tammy LeMaire
1031 Exchange provides investors with one of the best tax strategies for preserving the value of an investment portfolio.  By using an exchange the investor is able to defer the recognition of capitol gain tax that would otherwise be incurred on the sale of investment property. The investor can then use the entire amount of the equity to purchase substantially more replacement property.  To qualify as an exchange the relinquished and replacement properties must be qualified “like-kind” properties and the transaction must be structured as an exchange.
 
Exchanges are most often handled by a “Qualified Intermediary” who provides the necessary reciprocal transfer of properties to create the exchange and the “Safe Harbor” protection against actual and constructive receipt of the exchange funds as required by 1031.