Capital Gain

A capital gain refers to the profit that an investor makes from the sale of an investment property that has appreciated in value over time. This capital gain is typically subject to taxes, but by utilizing a 1031 exchange, investors can defer those taxes by reinvesting the proceeds from the sale into another like-kind property.

To qualify for a 1031 exchange, the new property must be similar in nature and purpose to the old property, and the entire proceeds from the sale must be reinvested into the new property. By deferring the capital gains taxes through a 1031 exchange, investors can continue to grow their real estate investments without having to pay taxes on the gains until they sell the new property.