Section 1031

AAA

DEFINITION of 'Section 1031'

A section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Taxes on capital gains are not charged on the sale of a property if the money is being used to purchase another property - the payment of tax is deferred until property is sold with no re-investment.

INVESTOPEDIA EXPLAINS 'Section 1031'

The idea behind this section of the tax code is that when an individual or a business sells a property to buy another, no economic gain has been achieved. There has simply been a transfer from one property to another. For example, if a real estate investor sells an apartment building to buy another one, he or she will not be charged tax on any gains he or she made on the original apartment building. When the investor sells the original apartment building and purchases a new one, the value used from the original to buy the new one has not changed - the only thing that has changed is where the value is being held.

RELATED TERMS
  1. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  2. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  3. Investment Real Estate

    Real estate that generates income or is otherwise intended for ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Like-Kind Property

    Any two assets or properties that are considered to be the same ...
  6. Unrealized Gain

    A profit that exists on paper, resulting from any type of investment. ...
Related Articles
  1. Tips For The Prospective Landlord
    Home & Auto

    Tips For The Prospective Landlord

  2. Boost Earnings Through Financial Planning
    Professionals

    Boost Earnings Through Financial Planning

  3. Use Real Estate To Put Off Tax Bills
    Options & Futures

    Use Real Estate To Put Off Tax Bills

  4. Avoiding IRS Penalties On Your IRA Assets
    Taxes

    Avoiding IRS Penalties On Your IRA Assets

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center