Section 1031 of the Internal Revenue Code provides that no gain or loss will be recognized on the exchange of an investment or business use property for another business use or investment property if certain requirements are met.

In a common investment property sale transaction, the property owner is taxed on any gain realized by the sale of the property. In a 1031 tax deferred exchange, a property owner/ taxpayer trades one property for another through a 1031 Qualified Intermediary and defers payment of any federal income taxes on the transaction until some time in the future. More…

Qualified Intermediary (QI)
The party that enters into a written agreement with the taxpayer (the exchange agreement) and, as required by the exchange agreement, acquires the relinquished property from the taxpayer, transfers the relinquished property to the buyer and holds the sale proceeds. Within 180 days from the transfer of the relinquished property the intermediary acquires the replacement property and transfers it to the taxpayer. Also known as facilitator, accommodator.

Relinquished property
The real property originally owned by the taxpayer and which the taxpayer would like to dispose of in the exchange.

Replacement property
The real property that the taxpayer would like to acquire in the exchange.