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Under normal circumstances, when you sell a property you have to pay tax on the gain. Gain is caused by taking depreciation deductions for tax purposes or by the property appreciating in value during its ownership. A Section 1031 tax deferred exchange, named for the Internal Revenue Code Section it refers to, allows an exception to the capital gains tax. When you sell your business or investment real estate, replace it with a different business or investment real estate, and complete an exchange, you can defer payment of the capital gains tax normally required on these sales. If your plans include using the money from the sale of a business or investment property to buy more of the same, a 1031Exchange provides greater proceeds for your next investment¿more than you could gain through the re-investment of after-tax proceeds. A 1031 Exchange is not a tax loophole. It is a section of the Internal Revenue Code, written by Congress, to allow anyone who meets all the requirements to sell their property and defer paying taxes on the gain. If you would like to find out more about a 1031 Exchange, please contact your local real estate lawyer