1031 Exchange Law and Legal Definition

1031 exchange is an exchange, i.e. sale and reinvestment of the proceeds there from, of business or investment property for other business or investment property, which allows a seller to defer payment of capital gains taxes.

For example, "the exception stated in Section 1031(a)(2)(A) clearly excludes property held primarily for sale from tax-deferred treatment under Section 1031. Per this section, the owner of property held primarily for sale cannot use that property in a Section 1031 exchange and qualify for tax-exempt status. [Callicutt v. Prof'l Servs. of Potts Camp, Inc., 974 So. 2d 216, 219 (Miss. 2007)"]