The Real Estate Encyclopedia
How Does An Exchange Work?
Category - Home Selling Questions - General Home Selling FAQ's

An exchange is a transaction in which all or part of the consideration for the purchase of real property is the transfer of property of “like kind” (i.e. real estate for real estate property).  The original attraction of an exchange was in those cases where it was difficult to produce a cash buyer.  Later, however, the exchange (Internal Revenue Code 1031) became a popular device for deferring capital gains taxes.  The tax-free exchange, as it is sometimes called (erroneously, since it only defers the tax), involves the exchange of property held for investment or the production of income for property of a like kind (which includes improved and unimproved property). 

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Home Selling Questions - General Home Selling FAQ's
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