Understanding Section 1031 Exchanges
Under current tax law, real estate investors have broad flexibility in choosing properties and structuring 1031 exchanges. Typically, they can exchange a rental house for farmland, an apartment building for a commercial shopping strip. They can even exchange office buildings for mineral rights.
Given the tight statutory timetables to choose qualified properties for exchanges, that flexibility can be crucial. Other types of investment assets, by contrast, get much stricter treatment under the tax code — and that difference in treatment opens the door to periodic attempts by green-eyeshade tax reformers on Capitol Hill to raise federal revenues by cutting down the number of eligible real estate exchanges.
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