Glossary

The deferred exchange is the typical 1031 exchange that most think about when discussing exchanges of real property. The tax-deferred exchange, as defined in Section 1031 of the Internal Revenue Code of 1986, as amended, offers real estate investors the opportunity to build wealth and save taxes. By completing an exchange, the investor (Exchanger) can dispose of his investment property, use all of the equity to acquire replacement investment property, defer the capital gain tax that would ordinarily be paid, and leverage all of the equity into the replacement property. Two requirements must be met to defer the capital gain tax: (a) the Exchanger must acquire like-kind replacement property, and (b) the Exchanger cannot receive cash or other benefits (unless the Exchanger pays capital gain taxes on this money). Also known as a delayed exchange or a Starker exchange.