1031 Exchange is a method of deferring capital gains taxes on the sale of real estate held for investment purposes by exchanging proceeds from the sale of such asset, into like-kind property of equal or greater value that is held for investment purposes, as defined in IRC Section 1031.
For example, if a taxpayer makes a $500,000 gain from the sale of an investment property, the tax consequences of the entire gain may be deferred if the proceeds are reinvested into another investment property of equal or greater value.