Understanding Tax-Deferred Exchanges of Real Estate

The concept of tax-deferred exchanges is quite simple: If one trades property for like-kind property and does not receive any cash or other non-like-kind property, then no profit has been made, and there are no immediate tax consequences. While the basis in the replacement property is affected, any gain is deferred until the eventual sale of the replacement property.

Tax-deferred exchanges of real estate and personal property have been recognized by the I.R.C. since the 1920s, and regulations introduced in 1991 made structuring such transactions easier.

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